In April, the Central Depository Services (CDSL), where assets like stock, bond, and ETF are stored, said it had become the first depository in India to have over 3 crore demat accounts.

Meanwhile, trading turnover on Indian stock markets has risen by around 300% since March 2020.

With their businesses in the green, stockbroking firms have also become a rare industry that is creating new jobs at a time when many other sectors are faced with a serious unemployment problem.

Job creation in a pandemic year

Mumbai-based brokerage firm Motilal Oswal Financial Services (MOFS) added more than 1,100 employees between March and December 2020, according to the company’s investor presentation (pdf). The new additions were across teams, including wealth management, equity dealing, and sales.

“With the stock market soaring new heights, it was a great year for us. The business grew at a stellar pace which led to an increase in hiring,” said Sudhir Dhar, executive director and head of HR at MOFS.

One of India’s leading and oldest broking firms, Sharekhan, added more than 100 employees during the financial year 2021. “The majority of hiring has been in sales due to the demand for account opening. Also, the industry is going through the digitisation phase, so we hired more IT staff,” said Jaideep Arora, CEO, Sharekhan.

While job creation by the industry is great news given the overall unemployment problem, the growth of brokerages may taper in the near term.

Covid-19 and Indian stock markets

Indian stock markets are already correcting from their all-time highs with risks such as slower-than-expected economic recovery and surging Covid-19 cases looming large. This trend may spook some retail investors and deter new ones from taking the plunge into equities.

“Going forward, the outlook for the brokerage industry is cautiously stable,” Samriddhi Chowdhary, vice president and co-head of financial sector ratings at ICRA said. “While the industry is expected to clock a healthy growth on an aggregate basis, the traction witnessed in FY2021 is expected to moderate in the next fiscal.” The ongoing investor exuberance is expected to gradually wane, Chowdhary said, and the trading volumes will cool off to some extent.

The fall in stock prices means fewer debutants would be drawn towards the equities this year.

“There is an element of cyclicality to new demat account openings and it fluctuates with the market,” said Arora of Sharekhan, recalling that the industry had witnessed similar strong growth between 2003 and 2008 when there was a strong bull run and then growth slowed post the financial crisis.

While he expects the growth to moderate this year, Arora is confident that the industry will continue to grow in the long run because of factors such as digitisation, growing awareness about equities, diversification of saving, and a low-interest-rate environment.

📬 Sign up for the Daily Brief

Our free, fast, and fun briefing on the global economy, delivered every weekday morning.