Broker earnings stay under pressure in Q1 as derivatives trading slows

Among listed brokers, standalone revenue IIFL Capital Services rose 3% in the June quarter from the January-March period. In the case of Billionbrains Garage Ventures (Groww), Angel One and Anand Rathi Share & Stock Brokers, revenue declined 1-4%. In contrast, Motilal Oswal Financial Services' revenue surged 88% in the period.

While standalone net profit at Groww and IIFL Capital Services rose 2.5% and 14%, respectively, quarter-on-quarter, Motilal Oswal reported a profit of ₹665 crore after posting a loss of ₹49 crore in the March quarter. Angel One and Anand Rathi Share & Stock Brokers, meanwhile, reported profit declines of 23% and 44%, respectively.

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"First, Q4 had a high base, driven by the sharp rally in gold and silver, which boosted trading activity and broker earnings, and we have seen that momentum ease in Q1," he said. "Second, derivatives options premium turnover declined by 4-5%, while retail cash market turnover rose 18-19%, weighing on brokers with higher F&O exposure."

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Shukla said firms with diversified revenue streams, including wealth management, distribution and margin trading funding (MTF), were better insulated. Raj Gaikar, research analyst at Samco Securities, said the June quarter earnings reflected a change in the earnings mix rather than a slowdown in demand.

“Year-on-year growth across all players shows retail participation remains healthy,” he said. “The sequential weakness was largely driven by Sebi’s derivatives reforms, expiry rationalisation and tighter position limits, which reduced index options premium turnover.” Stock performance has been mixed so far in 2026. While discount brokers such as Angel One and Groww have gained 29% and 28%, respectively, Motilal Oswal Financial Services was up 3%. IIFL Capital Services and Anand Rathi Share and Stock Brokers have declined 11% and 19%, respectively. The Nifty 50 is down 8.2%, while the Nifty 500 has declined 3.2% in 2026.

THE ROAD AHEAD

Shukla of Motilal Oswal said that the revenue mix is getting healthier in the broking business, especially for full-service brokers. “Businesses such as margin trading funding (MTF), wealth management, mutual fund and insurance distribution have become increasingly important contributors to profitability,” he said.

Gaikar said that among individual brokers, Angel One saw margins come under pressure due to higher spending on marketing and new businesses, while Groww’s flat topline reflects a mix shift where derivatives income declined off an elevated Q4 base, while MTF, float and commodity derivatives absorbed it, and Anand Rathi’s decline was due to weaker transaction and capital markets income.

“Looking ahead, traditional brokers with stronger cash market exposure are better positioned despite softer derivatives volumes,” said Shah of Kotak. “Additionally, the continued growth of MTF books should support earnings through higher interest income, better brokerage yields than regular cash trades, and increased trading volumes.”

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