When trading in the stock market, it is crucial to know the various charges which you will incur along the way. This includes brokerage charges. Brokerage is a standard charge that all investors must pay to the stockbroker for their services.
Read on to know about the brokerage charges you need to consider before you start trading.
Who is a stockbroker?
Stockbrokers are essentially financial intermediaries or agents who help you trade in the stock markets. Many stockbrokers work for a brokerage firm. They handle transactions for a number of individual and institutional customers. Stockbrokers help you trade in various financial instruments such as:
Stocks
Futures
Currency derivatives
In India, there are mainly two types of stockbrokers, namely Full-Service Brokers and Discount Brokers. Let us read more about them:
Full-Service Brokers
Full-Service Brokers take care of the buying and selling of shares. They conduct extensive research about the market, prepare reports, and offer you sound investment advice. The brokerage rate charged by these brokers is generally between 0.01 to 0.50% of the total volume of shares purchased for both intraday and delivery.
Discount Brokers
As compared to Full-Service Brokers, Discount Brokers charge a lower brokerage fee. They make only trade transactions and do not offer you any financial advice. Discount Brokers have a fixed fee for every trade made by their clients.
What are brokerage charges in India?
The brokerage charges vary from one stockbroking firm to another. Additionally, your brokerage plan and the type of broker you opt for also influence this charge greatly.
The following brokerage plans are offered in India:
Brokerage charged based on the percentage of trading volume
Flat brokerage charged per transaction
Monthly unlimited trading plan
Note: If you have opted for a percentage-based brokerage rate, the brokerage increases with your trade frequency.
How is the brokerage charge calculated?
Brokerage charges are generally applied on both buying and selling of shares. The lowest brokerage charges on Demat account are calculated on the agreed percentage rate on the total cost of shares acquired or sold. Let us understand how these charges are calculated.
Intraday Trading:
Intraday Trading is when you sell the shares on the same day they were purchased. However, you need to ensure that your selling position is the same as your purchase position. The brokerage fee for intraday trading is 0.01 to 0.05 % of the total volume or transaction amount.
So, if we must put this information in a formula, here is how intraday trading calculation is done:
Intraday Trading = Market price of each share X Total numbers of shares X Percentage of brokerage for intraday trading
Delivery Trading:
Delivery trading is when you decide to hold the shares instead of selling them. The brokerage fee for delivery trading is about 0.2 to 0.75% of the total volume or transaction amount.
Putting this information in a formula:
Delivery Trading: Market price of each share X Total number of shares X Percentage of brokerage for delivery.
What other charges comprise the net trading cost?
Here is a list of other charges which constitute your total trading cost. These charges may differ depending on the type of financial instrument you select.
Transaction charges: These are charged by the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE), on every transaction you make. They are also known as Exchange Turnover fees.
Securities Transaction Charges: This fee is applied on the value of the securities that are being traded.
Commodity Transaction Charges: This tax is put on commodity derivatives.
Stamp Duty: The state government levies this charge for conducting securities transactions.
GST: This is a capitalised government tax. It is charged at 18% of the transaction charges and brokerage cost.
SEBI Turnover Fee: The stock market regulator – SEBI levies this charge for trading across all securities’ types, except debt securities.
It is advised that you select a trusted financial partner who can offer you various benefits such as:
Lower brokerage charges
Cashback or discounts on the Annual Maintenance Charge (AMC)
You can open a Demat account with various banks such as HDFC Bank. Our bank allows you to open a Demat Account and Trading Account in just a few clicks.
Click here to open Trading and Demat Accounts with HDFC Bank today!
*Terms and conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances.
*Terms and conditions apply. This is an information communication from HDFC bank and should not be considered as a suggestion for investment. Investments in securities market are subject to market risks, read all the related documents carefully before investing.