Retail investors led the transformation that popularized equity investing in India in recent years. As trading involves costs, traders look for the best bargains from leading trading apps such as Lemonn, Zerodha, and Upstox.
To be sure, brokerage is charged as a percentage of trade value. This means an equity investor or trader with high volumes pays a higher brokerage. Few online brokerage firms in India offer zero-delivery brokerage accounts for equity traders. For instance, Lemonn, a relatively new entrant to the stock broking space, offers zero brokerage on delivery trades for a year.
Introduction to commission-free stock trading in India
Equity trading refers to buying or selling securities on an exchange. The buy or sell transaction can be a delivery trade, intra-day trade, options trade, or purchase or sale of an ETF. The stock broker provides a platform for traders and charges a commission or brokerage to provide the online infrastructure.
Some investor-friendly brokers do not charge a commission on certain transactions, such as equity delivery trades, mutual fund investments, etc. An investor with a free brokerage account will not be charged any commission for trades placed on a platform.
One such example of a zero brokerage platform is Lemonn from PeepalCo. The trading and investment app offers zero brokerage on all trades for a year.
Difference between intra-day trade and delivery trade
Equity traders and investors participate in the market in different ways. It is the trade type that differentiates an investor from a trader.
An equity investor is a person who will buy shares without the intention of selling them on the same day. This is known as delivery trade, as shares will be credited to the investor's demat account.
An intra-day trader buys and sells the shares on the same day. Both legs of the transaction—buying and selling-will be completed on the same day. From a brokerage perspective, an intraday trader will have to pay a higher brokerage in absolute number terms because brokerage is payable on every executed trade, and an intra-day trader will have a higher trade volume. Therefore, a zero brokerage account for a year on Lemonn is a boon for intra-day equity traders.
Brokerage structure on Lemonn
Currently, Lemonn does not have a brokerage structure, as it offers zero brokerage on all trades for a year. As a trader, you can do delivery, intra-day, and options trading and buy mutual fund units for free on this trading and investment app.
Other charges levied on an equity delivery trade
While free equity delivery brokers will not charge any brokerage on equity delivery trades, a trade attracts other charges levied by the government, stock exchange, etc. The charges are as follows:
- Securities Transaction Tax (STT)
- Goods and Services Tax (GST)
- Brokerage charges (zero in case of zero delivery brokerage)
- Stock exchange charges
- SEBI turnover fees
- Stamp duty, etc.
Benefits of using free equity delivery brokers
- Cost-saving
Brokerage is a cost for an equity investor as it is charged per trade. While the cost per trade may seem negligible, it can add up to a lot over time. A zero brokerage account can help save on the brokerage amount, leaving more money for investments.
- Incentivizes buying
An equity investor will most likely make a delivery equity trade. Zero brokerage on equity delivery trades will incentivize the investor to build a strong position in a stock over time to get the rupee cost-averaging benefit.
- More profits on the sale of stocks
Brokerage is charged on buy-and-sell transactions. When an investor sells stocks, net proceeds will be credited after deducting brokerage. Thus, brokerage can eat up an investor's profits or amplify losses.
Top free equity delivery brokers at a glance
Here is how the top 5 online trading and investment platforms stack up vis-a-vis zero delivery brokerage.
Lemonn - 0 delivery brokerage
Upstox - ₹20 or 2.5%, whichever is lower
Groww - ₹20 or 0.05% per executed order, whichever is lower
IndMoney - ₹20 or 0.05% per executed order, whichever is lower
Zerodha - 0 delivery brokerage
Among popular online trading and investment platforms in India, Lemonn and Zerodha are the only ones that offer zero delivery brokerage. But Zerodha charges brokerage for intra-day and F&O trades. Lemonn is the only online platform that offers zero brokerage on all trades for a year.
Consider costs
Brokerage can set back equity investors and traders alike. Therefore, one should closely analyze the brokerage structure before selecting the stockbroker. Value-conscious investors and new investors with limited capital could consider free equity delivery brokers like Lemonn to save on brokerage costs. The savings on brokerage per trade will leave more money for investments, benefiting the investor in the long run.
Disclaimer: No Business Standard Journalist was involved in creation of this content