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With entry of new age brokers using technology, client addition has seen strong 67 per cent YoY jump, including substantial proportion of new to market customers from Tier-2 and below regions, and also new investors looking for supplementary income in lockdown.

ICICI Direct said, in a research note, that digitalisation, mobile trading apps and relative underperformance of mutual funds has indirectly attracted interest in direct investment in capital markets.

Recent data, based on city wise distribution of turnover in cash segment in BSE and NSE, suggest increasing pie of Tier-2 and below cities in past two years. In BSE, contribution of Tier-2 and below cities in cash turnover has increased from 30 per cent in FY18 to 40 per cent in FY20 while in NSE, it has risen from 14 per cent to 17 per cent.

Though there is no direct aggregate data available on number of customers region wise, but management commentary of various brokerage houses suggests that investors interest among other regions in India has been increasing; specially among young population with broad age group in 25-35 years. Also a majority of new client addition has been coming from Tier-2 and Tier-3 cities, the report said.

The report said that ADTO (Average Daily Turnover) has shown increasing trend since the past months, especially during the lockdown period, which was a result of buoyancy in equity markets and increasing retail participation.

However, it would be key to watch how the trend behaves in coming months as margin requirement rises in step wise manner as per SEBI's new regulation. ADTO in Feb 2020 has reached Rs 45.9 lakh crore, which has doubled in last 6 months. Robust client addition and market volatility are key factors for surging volumes largely led by options.

Discount brokers like Zerodha, Upstox, 5Paisa and newly joined Angel Broking have been major beneficiaries, especially over past one year in terms of incremental client acquisition. Market share for Zerodha has increased from 13 per cent a year ago to 19 per cent as on January 2021. Similarly, RKSV Sec (Upstox) has increased its market share from 5 per cent a year ago to 11.3 per cent.

This has led many traditional brokerages like Sharekhan, Kotak Sec etc to come up with their own discount plans.

Overall market ADTO has increased over 2x from Rs 14.4 lakh crore in Q3FY20 to Rs 31.1 lakh crore in Q3FY21, and has shown increasing trends sequentially.

Client addition also has been on similar lines with active clients increasing 67 per cent YoY to 1.63 crore; with substantial participation from New to Market customers from tier-2 and below cities, the report said.

Reasons attributable to such robust accretion could be awareness & acceptance of equities as investment class by millennials, relative underperformance of large number of mutual fund schemes and low yields in fixed income asset.

Discount brokers continued to gain majority of incremental clientele as well as ADTO. Consequently, traditional brokers have started offering competitive fixed brokerage plans, thereby, blurring earlierlines of difference between peers. Bank-led brokers including Kotak Securities, and Axis Securities have started offering low brokerage plans while traditional non-bank led brokers like Angel Broking and Sharekhan have also joined the bandwagon, the report said.