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India’s retail brokers are bracing for a sharp erosion in active clients and revenue as the escalating West Asia war threatens to further dampen market sentiment and trading activity.

The active retail client base of brokerages has already shrunk over the past year due to muted, rangebound markets and the impact of regulatory curbs on derivatives trading. The outflow of active clients is set to intensify from March as the US-Iran war increases the risk of more retail investors stepping away from the stock market.

“Broker revenues are down 20-30% across the industry year on year. Recovery will depend on net client additions—how many customers are acquired relative to those becoming inactive. If acquisition does not outpace attrition, revenue pressures will persist,” said Sandeep Chordia, chief operating officer at Kotak Securities.

He added that with the markets subdued over the past year, the recent decline is likely to worsen the trend. Kotak estimates a 10-15% hit on broker revenue if the war continues beyond April.

“Near-term active client numbers could see further pressure. If this continues, the industry risks a ‘leaky bucket’ dynamic, where existing clients exit faster than new ones are onboarded,” Chordia said.

The slowdown in retail investor participation started even before the latest geopolitical shock. Total active clients across brokers declined about 8% to 44.81 million as of February in FY26 from levels in FY25, marking a reversal after years of rapid expansion driven by retail inflows, according to National Stock Exchange data. Active clients are investors who have traded at least once on the exchange in the past 12 months.

To be sure, dematerialized accounts—digital, paperless accounts required for trading in securities—have been growing in the country. The number of demat accounts rose 17% to 222 million in February from a year earlier, according to the Securities and Exchange Board of India (Sebi).

The active client base of Groww, the country’s largest broker, fell 1.4% to 12.7 million over the 11 months ended February, a sharp contrast to the 35% growth in FY25, according to the NSE data. Zerodha reported a steeper 13% drop to 6.87 million, while Angel One’s active client base declined 10.9% to 6.75 million. Among traditional brokers, Kotak Securities and HDFC Securities both reported a 7.2% decline in active clients.

The Nifty 50 has fallen 8.23% since the onset of the conflict on 28 February, while turnover of the index’s stocks has dropped 14.4% to ₹47,239.2 crore as of 27 March, reflecting weaker trading appetite. The pullback has been sharper among investors who entered the market during the post-pandemic rally.

“Lacklustre primary market activity and loss aversion attributed to the West Asia war may lead to fewer active customers in March. New investors have not seen a significant correction in the market up until now. If the shock persists alongside lacklustre returns, people will stop transacting in the stock market,” said Dhiraj Relli, managing director and chief executive officer at HDFC Securities.

The conflict, which began with US and Israeli strikes on Iranian targets, has escalated into a broader war with significant economic spillovers. Iran’s retaliatory attacks on energy infrastructure and shipping, along with disruptions in the Strait of Hormuz, have choked oil flows, pushing up crude oil prices and increasing volatility in global markets.

The Indian rupee has also come under pressure, falling past the 94-per-dollar mark to a record low on 27 March. Since the conflict started, the currency has weakened about 3.5%, reflecting concerns over a prolonged energy supply shock and its impact on oil-importing economies such as India.

This deterioration in macro-economic conditions is weighing on the market for initial public offerings as well.

“The fall in active clients is due to current market activity and a lower number of applications for primary market listings. Earlier, retail investors used to submit multiple applications for an IPO on behalf of their family members. Now, the applications from family members have declined as most companies are listing at a discount,” Relli said.

Mint reported earlier that the pace of IPOs could moderate in 2026 unless market sentiment stabilizes, as merchant bankers flagged rising uncertainty amid the escalation of the US-Israel-Iran conflict. Companies including XED Executive Development and PhonePe have deferred or cancelled their listing plans, citing geopolitical tensions.

Market participants said the behaviour is consistent with past cycles.

“Investing activity is cyclical in nature. If markets are rangebound or bearish, active clients come down. This is a typical fear-and-greed factor. If there is fear, activity slows and if there is greed it increases,” said Kranthi Bathani, director-equity strategy at WealthMills Securities.

Sebi’s curbs on derivatives trading have also contributed to the drop in active clients. Measures introduced in October 2024, including a reduction in weekly expiries to one per exchange, an increase in lot sizes, and the removal of calendar spread benefits on expiry day, have made frequent trading less accessible. These were followed by another round of reforms between July and December 2025 aimed at curbing outsized positions and systemic risks.

The regulatory push came after Sebi found that 91% of 9.6 million individual investors who traded largely in options incurred an average loss of ₹1.1 lakh in FY25, with cumulative losses of ₹1.06 trillion in that year alone. While these measures were aimed at protecting investors, brokerages said they also weighed on participation.

Chordia said options volumes have largely stabilized and are back to pre-curb levels and even active client participation is now close to earlier levels. He said monthly active clients in options fell from about 4.2 million in September 2024 to 2.7 million in March 2025 before recovering to 3.6 million in February 2026.

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