Online trading is simply an exchange of securities over a virtual network through your broker. While it has been in existence for a few decades now, the form and substance have been changing dramatically. Indians are traditionally known to be “savers” rather than “spenders” or “investors”, thus showing the huge inflow of money in fixed income products. However, with the advent of innovations in trading technologies and user-friendly policies, we are slowly becoming a country of “stock traders” with the demat account applications having grown by 51.5 million in FY 21.
Let us see how various aspects in technology and changes in trading policies by the Securities and Exchange Board of India and various exchanges have grown the attraction towards the stock market.
Role of Technology in Trading – Attracting All Demographics
India is aiming to become a $5 trillion economy by the end of 2030 and youth and new technologies play a huge part in this. The domestic investment flow in the stocks of a country instills a sense of confidence within the business environment. The youth with higher disposable income than ever before understands the importance of early investing much better than the earlier generations. Easy investing apps – with low to zero brokerage have played a substantial role in attracting this demographic.
From filling out a demat account application to opening a trading account, the entire process is easy and quick with no hassles of visiting branches physically.
Impact of Technology on Costs
Physical trading spaces require large terminals, customer seating space, and personnel to attend to the customers. By using simple apps like most brokers today, along with a well-informed customer helpline, you can cut down the costs to half or even less. Add to this, the zero charges to open trading accounts, clients are more than happy.
This cost can be passed on to clients who wish to trade on your platform. One unique example is the Robinhood trading platform in the U.S which has taken the trading industry by storm. It works on a commission-free concept and allows the investor to take positions in trades even without any collateral or account balance, and even allows fractional ownership of shares!
All this has been possible owing to the magic of technology to allow such trading and recording and tracking of trades. We can see a similar future in stock trading in India if the regulations allow.
With increasing levels of trading and investing knowledge of people, regulatory bodies are allowing new rules in trading that have opened the possibilities for stock trading even more. The future will see the usage of more margin trades and leverage for investment. While this concept was so far limited to derivatives, the allowance of margin trading facility for shares will increase the participation of small investors.
Easing of Payments – Larger Access
With new and easy mobile-based technologies – QR, NFC cards, verifications of KYC through video, and Aadhaar-enabled Payment System giving more control to the client, expect people from all walks of life trading remotely with even smaller trading capitals and high hopes to earn big from the stock market. The stock market will see a significant inflow owing to the quick settlement of trades and payments with faster networks in UPI (Unified Payments Service), IMPS (Immediate Payment Service), and NEFT (National Electronic Funds Transfer).
Intelligent Investing – Use of AI and Robo-advisory
The other half – which has huge amounts of capital to invest but does not have the time – will focus on AI and Robo-advisory in stock picking. While investment advisors will grow, the D-I-Y method of investing is going to be a substantial part of the future of online trading. SEBI, with various stakeholders, has been working to ease the rules for trading and investing for the sophisticated investor under these options.
With innovation in technology being the backbone of the future of the stock market, one can expect an exponential increase in the participation of retail investors and a strong domestic demand to invest in Indian companies. This will add to the idea of “Make in India” and also create a strong capital base for Indian businesses to raise capital.