KJ Somaiya College of Arts and Commerce,

Vidyavihar (E), Mumbai 400077,

Autonomous

Financial Planning:- Comparative Study of Zerodha and Edelweiss.

In Banking and Insurance, Submitted by Adarsh Mishra

Under the guidance of Priti Dhadge

Sub:- Research Methodology

Acadamic Year - 2018-2019
“Comparative analysis of Zerodha and Edelweiss”

Introduction:

Before the emergence of technology, only wealthy could afford a stock broker and get access to
the stock market.​However, the internet has brought an explosion of ​discount​ brokers that
allow individuals with smaller capital to trade, at a smaller fee.A discount broker is a
stockbroker who carries out buy and sell orders at a reduced commission rate.
However, he or she provides no investment advice, unlike a full-service broker.

A full-service broker is a licensed financial broker-dealer firm that provides a large

variety of services to its clients, including research and advice, retirement planning, tax
tips, and much more. Of course, this all comes at a price, as commissions at full-service
brokerages are much higher than those at discount brokers.
Full-service brokers can provide expertise for people who don't have the time to stay
up-to-date on complicated issues such as tax or estate planning; however, for those
who just want to execute trades without the extra services, discount brokers are the way
to go.
So, the investors are confronted with two choices when dealing in the market. One
provides cheap brokerage charges, and one provides plethora of services for its
customers. In order to better understand both the situation, the example of Zerodha and
edelweiss has been taken.
Zerodha being the biggest discount broker in India, acts as a perfect specimen to study
the business model of discount brokers. The same could be said about Edelweiss,
which is a full service broker. Both services leads to completely different experience for
the customers who use them.

Objectives of research:

1. To compare the business model of Zerodha and Edelweiss.

2. To understand the effect of using Zerodha and edelweiss on the
customers.
3. To clarify the benefits and drawbacks of using discount broker and full
service broker.
Scope of the study:-

The study primarily deals with discount and full service brokers. The study
covers Zerodha and Edelweiss, both being the top discount and full service
brokers respectively. The analysis is strictly based on the benefits the
services provide to the customers, and how it has a effect on the
investments in long term perspective and short term perspective.

Research Methodology:-

● Sampling technique - To understand the effects of the services,

convenient sample were taken.
● Sample Size - 50 random people were chosen for the survey of
preference between Zerodha and Edelweiss
● Sample description - In this study, 38 working professional, out of
which 17 were having experience of more than 15 years in stock
market, and 12 students were chosen. All the candidates were familiar
with the concept of discount broker and full service broker.

Review of literature:-

Benefits of discount brokers over traditional brokers, by Pratik Malviya - ​The

article provides information on how discount brokers provide a great way for
investors to make investments without worrying about the commision and
fees charged by full service brokers, which can compound into a great deal
of monetary loss. He also explains how discount brokers sometimes provide
educational tools which helps the investors to understand how to invest,
instead of just depending upon the suggestions of the full service brokers.

Is a full service broker right for you, by Joshua Kennon - T​ he article shows
how full service broker might be right for people with low experience even
though it cuts through the profit of the investments. He explains how
investing through the full service brokers provide a lot of benefits and
services which can help in the long term as the firms are usually veterans in
the market and they can properly guide people into proper investments
which can be beneficial to them in long term or short term, depending upon
the trade.
Into the world of stock broking, by Shalini Melvin - ​The study shows how the
two types of brokers have stark different effects on the customers. The
author further provides data on how discount brokers low commission and
fees have led to big monetary gain due to the compounding effect. Although
the data also included how people were discouraged from investing after first
losses in trading, which is pretty frequent among customers with low level of
experience in discount broking firms. The full service brokers also have a
facilitate better performance among the clients.

Null Hypothesis:-

Investing through a full service broker leads to loss in the capital gains due
to the high level of commission and fees levied by them.

Alternative Hypothesis:-

Investing through a full service broker leads to higher gains even with high
level of commission and fees, due to the plethora of crucial services provided
by it.

Research Report:-

I. Zerodha

Zerodha kick-started operations on the 15th of August, 2010 with the goal of
breaking all barriers that traders and investors face in India in terms of cost,
support, and technology.
Today, Zerodha’s disruptive pricing models and in-house technology have
made them the second largest stock broker in India by active retail clients,
and the largest by trading volumes on the top Indian stock exchanges.
Over one million clients place several million orders every day through our
powerful ecosystem of investment platforms, contributing to over 10% of all
Indian retail volumes.
In addition, they run a number of popular open online educational and
community initiatives to empower retail traders and investors.
Rainmatter, their fintech fund and incubator has invested in several fintech
startups with the goal of growing the Indian capital markets.
Like other online stock trading companies, Zerodha offers trading services to
buy & sell stocks, futures & options (in Equity, Currency & Commodity
segments). Zerodha's has built its own trading application named 'Kite' and
back office software named 'Q'. All trading software applications including
trading terminal, website and mobile trading (android / iOS) are made
available to its customer for free of charge.
Zerodha's brokerage structure is extremely simple and very easy to
understand. Customer who moved to Zerodha has reported 80% to 90%
saving in brokerage in comparison to full-service brokers. Zerodha is among
the most technologically advanced and cheapest stock broker in India for all
kind of investors including people who trader just a few times in a month to
day traders who execute 100's of trades each day.
Zerodha also have amazing educational initiatives like Varsity, Trading Q&A
and Opentrade. These platforms are actively used by its customers to
interact with Zerodha team.

Advantages of Zerodha

● Rs 0 for equity delivery trades and Rs 20 or .01% whichever is lower per executed order
for everything else.
● No upfront fee or turnover commitment.
● No special penny stock brokerage or minimum contract charge.
● Trading, charting, and analysis, all rolled into one next generation desktop platform Pi.
Desktop, Web, and Mobile trading platforms.
● Innovative and unique trading tools - SPAN Calculator, Bracket orders & Trailing Stop
loss, Market Intel, algoZ, Option Strategy, Market Monitor,etc
● algoZ - write, backtest and go live on Technical Analysis strategies for free

Disadvantages of Zerodha

● No 3-in-1 trading account option available

● No monthly or periodic plans that are suitable for heavy traders
● No margin against shares
● Does not provide the customers with research, which can make trading and investing
difficult for the new investors.

II. Edelweiss

Edelweiss Broking Ltd. is an Indian Financial services company based in

Mumbai, India. The company is registered with National Stock Exchange of
India, Bombay Stock Exchange and MCX Stock Exchange.Edelweiss Broking
limited was publicly incorporated on 7 February 2008 after Edelweiss Group
had received final regulatory approval from the Securities and Exchange
Board of India (SEBI) to start its mutual fund business by 2008. The
Stockbroker acquired retail broker Anagram Capital Limited in Jan 2010. On
December 12, 2012 the company was listed under National stock Exchange​.
Huge network of sub brokers,trading in all of the segments backed up by
strong research, strategies and analytical tools, Edelweiss has everything
and more than a investor need to success but at a little higher cost.
Edelweiss Financial Services Ltd are present in 5 businesses including capital
markets, asset management, credit, commodities and insurance.
The Retail Broking business of Edelweiss offers facilities to invest & trade in
all major asset classes: Equity, Debt, Mutual Funds, IPOs (offline only),
Currency Derivatives and Futures & Options.
Edelweiss offers investment advice backed by research and analysis to its
customers across asset classes, trading styles and time horizons.
Edelweiss Group has over 240 offices in 125 cities including 8 international
offices with 5,555 employees catering to over 6 lakh clients across various
businesses. Edelweiss also have over 4,290 Sub Broker and Authorized
Persons spread over around 640 cities making it one of the largest retail
broking and distribution networks in India.

Advantages of Edelweiss:-

● Along with equities, edelweiss also provides the platform to purchase

other securities like bonds, debt instruments, commodities, insurance,
and others.
● Edelweiss also allows investors to invest in mutual funds through its
platform with plans like systematic investment plans
● Edelweiss provides a toll free number which allows the investors to
solve their query even when they run into some kind of problem
● Edelweiss provides extremely detailed reports on various investment
avenues, which gives the investors the opportunities to invest in them
● The research report of Edelweiss is helpful to both beginners and
veterans in the market due to the quality of the report

Disadvantages of Edelweiss:-

● Edelweiss is more expensive than discount broker.

● All the services provided by Edelweiss is not needed by all the
investors, but they are charged for it nonetheless
 ● Edelweiss pushes the trader to make trades.

Questionnaire

Questions Yes No

Are you aware of the discount broker like Zerodha? 97% 3%

Are you aware of Full service brokers like Edelweiss 91% 9%

Do you think it is advisable for beginners to start with 84% 16%

full service brokers like Edelweiss?

Does high amount of commission and fees acts as a 57% 43%

deterrent for you in investing?

Do you feel the research data and suggestion made by 73% 27%
full service brokers are helpful?

Do you think discount brokers provide enough facilities 52% 48%

for you?

The above survey was conducted on traders and investors with a good
amount of experience. From the data, we are able to come to following
findings:

● It is overwhelmingly agreed that beginners should start their journey

in trading and investing through full service brokers who provide
adequate amount of data.
● People feel high level of fees act as a burden and it further reduces the
capital gains, even if they are provided with research which helped
them getting the capital gains in the first place.
● Majority of people also seemed to agree on the fact that the data and
research provided by the full service brokers are helpful.
● There was a neutral result when people were asked if discount brokers
provided enough facilities.

Conclusion:-
The study has proven that using a full service broker like Edelweiss in the
beginning of one’s trading and investing journey is helpful, as it provides
sound advise which is endorsed by the veterans of the industry. Using a
discount broker does come with a benefits of low cost, but it is only advised
to people with adequate amount of experience. The use of full service broker
leads to loss in capital gain, but it is worth it if a person is not able to profit
without proper guidance. Investing is a complex process, with a lot of
variables, and it is always advised to completely understand the market and
the companies before investing directly. If a person wants to directly invest
in equity, he or she must have an idea, and strategy in place. So if the
person with not a lot of experience wants to invest in market, and not
through mutual funds, then they must use a full service broker, who can
provide them with proper research data. The use of discount brokers should
happen only when a person is adequately experienced.

Suggestions:-

● Full service brokers should provide the customers with customizable

plan which only involves the service required by the customers.
● Discount brokers should come up with campaigns to educate the
customers who are just starting to invest, as they are investing
without any guidance.
● General public should not invest through a discount broker if they are
just starting out in investing.

Bibliography:-

www.zerodha.com
www.edelweiss.in
www.marketsmojo.com
www.pehlatrade.com
www.timesnow.com