SEBI Rules & Global Jitters Crush Retail Trading - Brokers Double Down on Fintech and Wealth Management

Retail traders hit the brakes as regulatory headwinds and market volatility collide. SEBI's new framework tightens screws while global economic tremors spark risk-off sentiment across traditional markets.

Brokers pivot to survive

Instead of fighting the tide, major brokerage houses accelerate their fintech transformations. They're dumping legacy systems for AI-driven platforms that automate everything from compliance to portfolio rebalancing. Wealth management emerges as the new battleground - with personalized crypto exposure becoming the secret weapon for retaining high-net-worth clients.

The compliance paradox

While regulators crack down on speculative trading, they're quietly greenlighting blockchain infrastructure projects. Smart brokers leverage this gap, building regulatory-approved digital asset platforms that traditional banks still fear to touch. They're betting big that today's compliance headaches will become tomorrow's competitive moats.

Just what finance needs - more middlemen finding new ways to slice fees on 'democratized' investing.

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The recent shift in market structure due to SEBI tightening its regulations — from increased margin requirements to larger lot sizes and stricter risk controls — has resulted in reduced speculative and very short-term trading volumes.

“At the same time, markets have gone through a phase of time-wise correction after a stellar three-four year rally. This combination has led to a cooling-off in turnover growth, especially in retail-driven segments like options and intraday trading,” Ankit Mandholia, Head - Equity and Derivatives, Wealth Management, Motilal Oswal Financial Services (MOFSL), told businessline.

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Ambarish Kenghe, Group CEO, Angel One, said even though regulatory changes may appear stringent in the short run, “they are put in place to protect investors and keep the system fair”. While they may moderate activity in the NEAR term, he pointed out that at Angel One, many customers who joined in FY21-22 continue to remain active.

Rebalancing seen

“It’s equally important to recognise that while regulations may shift how different parts of the industry operate, the capital markets’ profit-pool as a whole will remain resilient. There may be some rebalancing within its components, but the overall landscape will continue to expand because India’s participation story is only at the beginning of its curve.”

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However, both Mandholia and Kenghe said that business has remained resilient, nevertheless. Over the past year, subdued returns and range-bound indices have led many retail investors to reduce leverage and trade selectively, according to Mandholia, who added that this is also a period of portfolio consolidation and accumulation. “What’s changed is the way clients participate, there is a stronger momentum in equities and SIPs. This shift is a healthy sign for both investors and the market,” said Kenghe. This shift from speculation to research-driven participation is a positive sign of market maturity, added Mandholia.

Aspirational demand

An industry participant explained that post Covid, more young, digitally savvy individuals have entered the market with aspirations of wealth creation through financial products, looking beyond just traditional fixed deposits and physical assets. “Their aspirations combined with a disciplined approach has resulted in improved personal assets. With this affluent class planning for retirement, there is a growing demand for more and differentiated financial products – matured investment instruments,” he said. Parking money in a financial instrument is going out, “now it’s more about hedging and diversification”.

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Perhaps, it is this demand that has encouraged a traditional, pure-play broking firm like Angel One to offer other fintech services such as wealth management, asset management, lending or even insurance. According to Kenghe, Angel One now focuses on tech-led personalisation, education and advice-led experiences, to retain and deepen engagement. “Our platform uses data and AI to deliver sharper insights, timely nudges, and risk alerts that help clients make informed choices.” Kenghe added, “These businesses help us offer a full-stack FinTech platform that grows with clients and supports them across their entire financial journey.”

Alternatives

Along with other services, including research and model portfolios for equities and strategies for derivatives, MOFSL, too, is “expanding into fixed income, alternates and insurance solutions — enabling clients to build diversified, resilient portfolios with equities as the Core driver of long-term compounding,” said Mandholia. A diversified product mix and conscious focus on quality participation “makes the business structurally stronger and better positioned for the next growth cycle,” he added.

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According to estimates, Indian households allocate only 7-8 per cent of their financial savings to equities, compared with nearly 20 per cent in other Asian markets. “This gap highlights the vast headroom for deeper participation in securities and the growth of India’s investment ecosystem,” said Kenghe.

Published on September 23, 2025