Zerodha Review

Stockbroking

A financial institution that facilitates the trade of securities between the buyer and seller is a brokerage firm or brokers. A full service stockbroker who carries out stock trading has the additional responsibility of doing research and providing recommendations to their clientele (investors or traders).

Full service stockbroker will charge a high premium for their services. Now, everyone can have access to the stock market, thanks to discount brokers. A discount broker or an online broker is a firm that performs the trade for its clients (investors or traders) charging minimally, but does not provide financial advice.

Discount brokers offer their clients the convenience of performing trades via automated, computerized trading systems. There are many discount options provided by these firms as there is heavy competition. All brokerage firms, including discount brokerage and full-service discount brokerage are regulated in the same way and are licensed by each country’s financial regulatory authority.

Zerodha is on the top of the leading list of discount brokers in India due to its large trading volume, number of customers and growth. The name Zerodha is derived from the fusion of the English word Zero and the Sanskrit word Rodha meaning barrier. It was founded in August 2010 by Nitin Kamath, a professional trader for over a decade. He wanted to solve the many problems faced by traders and investors in India and came up with this brokerage that soon changed the landscape of Indian broking.

The headquarters of Zerodha is in Bangalore and its other franchise offices are in the major cities such as Hyderabad (Andhra Pradesh), Pune (Maharashtra), Ahmadabad (Gujarat), Chennai (Tamil Nadu), Vijayawada (Andhra Pradesh), Hubli (Karnataka), Salem (Tamil Nadu), Coimbatore (Tamil Nadu), Kanyakumari (Tamil Nadu) and Kochi (Kerala). Among the innumerable discount brokers in the nation, Zerodha is the firm that went online first. Anyone who would like to open an account online can walk into these franchise offices and get the services needed. The firm allows the investor to trade in share markets such as NSE, BSE, MCX-SX and MCX. Zerodha claims to have a whopping turnover to the tune of Rs. 7000 Crore which accounts for 2% of NSE total turnover.

Zerodha allows their clients to buy and sell stocks, futures and options such as Equity, Currency and Commodity. The electronic trading platforms are provided free of cost to the clients. The trading platforms provided by Zerodha are:

Zerodha Trader (Desktop application)
Web (html5) called Z5
Mobile
Offline (Call and trade with a charge of Rs. 20 per call)
Plug-in provided with AmiBroker, widely used technical analysis software. Traders can use AmiBroker in a semi-automated or fully-automated way.

The share trading platform has special features such as Cover Orders, Bracket Orders and Trailing Stop Loss incorporated.

Given below are some of the salient technology solutions and support initiatives they provide to their clients:

Brokerage/Margin calculators available on the website.
Reporting tool ‘Q’ that provides information on trades, positions, capital management and tax ready P&L statements.
Quant, a sabermetric tool that gives statistical information based on the client’s trading style.
Blogs like ‘Z-Connect’, ‘Trading Q&A’ and ‘Pulse’.
A contest called ’60 Day Challenge’. If a trader is net profitable in a 60 day period, all the brokerage charged to them is refunded.
Give away at crowd.in - Trader who guesses the weekly closing figures in Nifty gets prize money of Rs.1 lac.
Zerodha PI - a very advanced tool provided free of cost to traders. It provides most useful insights related to trading. Some features of Zerodha’s PI platforms are:
- 10 types of charts, 80 built-in indicators. Annotation can be done with over 30 drawing tools.
- A simple and powerful scripting language.
- Draw pattern on screen and find it in charts.
- Real time trade signals from automated expert advisors.
- Power traders can optimize through algorithms like neural networks and genetic algorithms.
- 50,000 candles worth of free historical data. Views can be docked and screen layout can be modified as required.

Trade Account Management with Zerodha

Trading Account

Account forms can be filled online and sent to the headquarters at Bangalore. The documents required to open an account in Zerodha include:

PAN card, address proof, 2 passport size photos, 2 cheques - 1 cancelled and another favoring Zerodha amounting to account opening fee
For trade derivatives, 1 copy of the following documents is required - Pay slip (latest), Form 16 / IT Returns (latest) and 6 month bank statement (latest)

The forms are filled and signed along with Rs. 350, a fee for opening the account, has to couriered to the head office at Bangalore. A period of 2 to 3 business days is generally taken for processing and creation of the trading account. Zerodha intimates their customers about successful creation of trading account through email. It also provides the trader with the username and password to access the trading account online.

Demat Account

Zerodha partners with IL&FS to provide Demat services to their customers. Traders have to send their Demat account opening form along with the Trading form to the Zerodha office. The fee of Rs.750 (Rs.350 - first year charge + Rs. 400 - account opening charge) is charged to the traders. Delivery based traders need a DEMAT account whilst F&O traders don’t need one.

Trading Account Opening Charges: Rs.300 for Zerodha forms and Rs.200 for printed ones
Trading and Demat account: Rs.850 for Zerodha forms and Rs.750 for printed forms (Rs.400 for Demat account maintenance charge)
Commodity Account only: Rs.300 for Zerodha forms and Rs.200 for printed ones

Brokerage Charges

Equity Delivery 0.10% or Rs. 20 per trade whichever is lower.
Equity Intraday 0.01% or Rs. 20 per trade whichever is lower.
Equity Future 0.01% or Rs. 20 per trade whichever is lower.
Equity Options 0.01% or Rs. 20 per trade whichever is lower (on Turnover).

Maximum brokerage that the trader can expect will be at most Rs. 20 per trade.

Other Charges (Broker hidden fees)

Traders when they use the ‘Call and Trade’ facility, need to take an extra cost of Rs.20 per call. Contract hard copies cost Rs.20 with extra courier charges whereas digital contract notes are sent free of cost through email. For delivery based equity selling, DP charges are Rs. 8 per transaction. Standard NSE charges, transaction charges and statutory levies are charged.

Normally, discount brokers keep brokerage low but hike their transaction charges. Zerodha stands out in that they charge the lowest for the transactions besides keeping low brokerage rates.

Zerodha is not for online traders if they

Need financial advice from brokers
Require a Banking, Demat and Trading linked into a single account. (In this case, Zerodha has partnership with IL&FS and the trading account can be mapped to the Demat account with IL&FS)
Look out for investment in IPP, FPO and Mutual Funds
Would like to have trading account and backoffice under single platform. Zerodha Backoffice is a separate entity and its needs unique access.

Zerodha is for online traders who

Take the 60 day challenge. Brokerage is refunded after 60 days upon success and a certification of recognition is received from Zerodha along with full time trader access.
Receive increased protection to open position as the ‘Bracket and Trailing Stop loss order’ is given to traders. Zerodha is the first to provide this offer in India.
Use Zerodha Varsity - Beginners in trading can utilize the trading knowledge bank.
Effectively use Trading qna - Forum created by Zerodha where the trading community interacts and lot of questions and answers related to trading can be found.
Utilize the algorithm tool - This tool is offered free of cost to all customers, can be used to code the technical trading strategies and test them.

Zerodha Fund Transfer

Traders can transfer funds into their trading accounts through the following methods.
Zerodha Trader - Funds can be transferred from the linked bank account through Zerodha Trader. The fund transferred will be immediately reflected and individual transfer charge is Rs. 9.
Zerodha Backoffice - Funds can be transferred from the linked bank account through the Zerodha Backoffice. The fund transferred will be immediately reflected and individual transfer charge is Rs. 9.
Through nowonline.in - Fund transfer through nowonline.in is the cheapest and quickest mode. The fund transferred will be immediately reflected and there is no charge incurred.
NEFT/RTGS - Funds can be transferred electronically to the trading account from any of the linked bank via NEFT/RTGS and there will be no charges.
Cheque Deposit - Transfer funds by cheque to the trading account from the linked bank account. Traders are required to send the scanned copy of cheque to Zerodha.

Fund withdrawals

Traders can request a payout through the Zerodha Backoffice. The withdrawal request will be processed by RTGS/NEFT transfer. Fund withdrawals are totally free of cost. Traders cannot withdraw funds through nowonline.in.

As of May 2015, this brokerage structure has had 50,000 accounts opened. It sure is making waves and has become the leading discount broker in the Indian share market.

Open Zerodha Account Now

Zerodha definitely happens to be a great discount broker with over 60,000 customers as of now.

This article is about Zerodha Review. Also see Top 10 Discount Stock Brokers in India