Zerodha, Angel One, Groww Feel The Squeeze From SEBI Crackdown

A steep decline in user base and revenues has left India’s premier investment tech platforms and discount brokers like Zerodha, Groww, Angel One rattled with the national markets regulator tightening its noose around the high-volume and high-risk F&O trading activities.

India’s broking industry has thrived for years on a model built on zero-cost or deeply discounted equity delivery trading, and fees charged from high-turnover, low-cost derivative volumes. Retail investors, encouraged by mobile-first platforms and low entry barriers, flocked to weekly options and expiry-day strategies that set transaction volumes and revenues zooming.

The NSE and BSE together made up more than 80% of the global F&O turnover in April 2025.

But, ever since the Securities and Exchange Board of India cracked the whip and thrashed out rules ranging from true-to-label transparency guidelines to expiry-day restrictions and stricter compliance demands, the economics of F&O trading has structurally altered to the extent that the investment tech platforms are now taking a relook at their business models. 

The overall F&O trading volumes reportedly fell by 29% in notional terms in FY25 from a year ago. SEBI, however, in a report earlier this year mentioned that trading volumes remained higher by 14% and 42% in premium and notional terms compared to two years back.

Inc42 observed the evolving dynamics at the investment tech space and focussed on some of the biggest entities in the market to comprehend how the SEBI rules have affected their businesses.

Zerodha: When Topline Comes Crashing Down 

Zerodha alone constitutes 18-20% of the average daily turnover (ADTO) for retail F&O on the National Stock Exchange (NSE). The revenue eroded at least 40% in the first quarter of FY26, according to a statement from the chief executive Nithin Kamath. 

He said in a blog post that the impact of regulations started telling upon the company’s financial performance from last October with the topline crashing from INR 10,000 Cr to INR 8,500 Cr between FY24 and FY25. 

“This risk has now crystallised with the increase in Securities Transaction Tax (STT) on options and the reduction of expiries to two weekly contracts on options. Along with these changes, the increase in the BSDA (Basic Services Demat Account) limit, the removal of the exchange transaction charges rebate, and a general drop in market activity, our revenues and profits took a hit last year, as we had expected,” he wrote.

Kamath warned of further revenue loss in FY26, reaching up to 50% by the end of the fiscal year and SEBI seems to be in no mood to control the situation. 

What’s the way forward? Zerodha has clearly stated that the company is weighing a strategic business pivot in the next few months where the focus will be on ancillary revenue streams like margin trading facility (MTF) and equity brokerage fees. 

Such a move is likely to have an industry-wide impact on the wealthtech space considering the startup’s share in trading volumes. 

Zerodha was the first to roll out the concept of zero fees for equity trading in India and eventually carved out a category called discount broking. It earned a major leverage over traditional brokers because of zero brokerage hook. Even traditional broker Angel One toed the line of discount broking and IPO-bound Groww brought in a string of zero-cost services model for retail traders.

High volume and risky F&O trades put up nearly 90% of the revenue for Zerodha, though platforms like Groww started out in less risky verticals like mutual funds, equity investments and later forayed into derivatives trading.

While Zerodha suffered the deepest dent in its topline in Q1 of FY26 because of shrinking F&O volumes, for Angel One and Groww, the losses were 25% and 17%.

“Zerodha built its most lucrative revenue line around F&O volumes. So, not surprisingly they will be hit in the short term by SEBI’s regulations. Having said this, the smaller players will also feel the burn as SEBI raised upfront margins, tightened position limits, and removed some benefits,” Sonam Srivasatava of Wright Research told Inc42. 

“With traders forced to put up more cash and speculative expiry-day strategies in options trading losing appeal, trade counts will fall sharply.” 

Angel One, Groww: Can They Absorb The Shock?

Listed brokerage Angel One saw its revenues slump 19% to INR 1,140 Cr with the bottomline taking a 61% knock to INR 111 Cr year-on-year in Q1 of FY26. The impact of the F&O crackdown was cushioned to some extent by its diversified business model.

While Angel One added a whopping 2 Mn users to its investor base in FY25, the regulations seemed to erase those gains with the leadership reportedly stating that the stricter F&O rules would hit its revenues by 20-25% in future.

Angel One shares slipped 7% on the day after its Q1 FY26 results were declared, taking a toll on the investor sentiment.

The company now plans to leverage its non-broking businesses like advisory and mutual funds and full service conventional broking model to absorb the margin pressure from SEBI’s F&O blows.

Srivasatava of Wright Research said that Angel One, India’s largest listed retail broker, which has over the years solidified its presence in F&O trading would likely leverage its extensive on-field relationship managers network to prevent further drain of investors.

“They have an unmatched presence of an old school agent-investor network which will at least insulate them from upcoming regulatory shocks and many among these investors have been used to paying the brokerage fees for decades,” she said.

Groww, which plans to go public next year, saw a 17.4% on-year decline in fees and commission incomes to INR 728 Cr in the Q1 of FY26. The company seems to have responded to the changing regulatory environment in derivative markets by lessening revenue dependency on broking fees.

Groww’s revenue share from brokerage fees reduced to 79.4% in Q1 of FY26 from 85% a year back. The damage was restricted by substantially higher income from MTF, personal loans, and fixed deposits. Groww, however, seemed to have bucked the trend of reducing profitability by diversifying revenue streams. In Q1, FY26, the company reported an increase in net profit by 12% YOY to INR 378 Cr.

With a heavy mutual fund strategy, Groww seems to have outperformed its rivals in the first quarter of FY26, and controlled the decline in revenues . The platform plans to leverage its marketing and customer acquisition strategies to hold on to its strong 12.3 Mn monthly active user base as of August 2025. 

Along The Way: More Squeeze Ahead

A crashing topline may not be the end of the woes for investment tech startups. Market observers apprehend stricter expiry-day curbs in the coming quarters. Zerodha’s Kamath, though, pointed out that SEBI was yet to engage with brokerages on ending the weekly expiry dates for F&O contracts.

“Expiry days, especially for weekly contracts, have been hotspots for retail traders, with SEBI data showing more than 90% of individual traders incurring losses. Before SEBI’s crackdown, there were multiple expiry dates in a week, fuelling a lot of F&O activity with speculative trading maximising around the expiration dates,” cofounder of a Bengaluru-based growth stage trading platform said, seeking anonymity because of the volatile situation. 

“The upcoming push aims to eliminate this by design, potentially cutting the overall F&O volumes significantly.” 

If such rules are enacted, discount broking platforms would face a double-edged sword which could translate into reduced transactional volumes from expiry trading and also a behavioral shift as retail clients move away from short-dated options to safer products like ETFs or mutual funds, where brokers earn less per transaction, according to him.

It may not, however, translate into margins earned from charging F&O traders.

So, what does the regulator say? SEBI has been vocal about deepening equity participation and making markets safer for small investors. 

It has brought in a string of guidelines to facilitate equity investments, including true-to-label charges, same day settlement for equity traders, simplified KYC norms and notified automated trading rules for equities.

“We see the government pushing for equity trading, instead of high-risk F&O business, which means the discount platforms can no longer rely on speculative F&O activity to subsidise free equity delivery trades, zero account maintenance charges, or unlimited free research tools,” Srivasatava said.

On its part, Zerodha has hinted at its next move. It plans to charge brokerage fees reintroduced on equity delivery.

Market observers said that there could be annual maintenance or account-keeping charges in the days ahead as well as subscription-based premium tiers for advanced analytics, faster execution, or advisory content.

In other words, discount brokers will likely resemble their global peers by charging modest but explicit fees for services, rather than depending on hidden spreads or speculative turnover.

The Bottomline: A Reset On The Cards  

SEBI’s interventions have reset the economics of India’s brokerage industry. The first-order effect has been visible in shrinking brokerage revenues at Zerodha, Angel One, and Groww. 

The second-order effect may be a fundamental pricing reset, if F&O trading income slashes more than 50%, brokers will need to monetise equity delivery, account services, and premium features more explicitly.

What regulators see as investor protection, brokers see it as revenue pressure. The outcome is a more stable, transparent equity market, but certainly not a future where India’s discount broking platforms will be entirely discounted.

[Edited By Kumar Chatterjee]