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Slow off the blocks, but online trade in India poised to grow fast

Slow off the blocks, but online trade in India poised to grow fast
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First Published: Mon, May 12 2008. 12 11 AM IST

Screen shots of some popular online trading websites such as Sharekhan.com, Icicidirect.com and Indiabulls.com
Screen shots of some popular online trading websites such as Sharekhan.com, Icicidirect.com and Indiabulls.com
Updated: Mon, May 12 2008. 12 11 AM IST
New Delhi/Mumbai: While Indian markets lag those in many emerging and developed countries in online trade volume, some share brokers expect buying and selling shares through the Internet to account for up to half of the total equity trade volumes in coming years.
Currently, online trade volumes in India is just about 20% of total trades.
Screen shots of some popular online trading websites such as Sharekhan.com, Icicidirect.com and Indiabulls.com
But brokers say better broadband connectivity across the country and wider awareness of equity as an asset class will fuel the increase in online trade. India’s demography, where two-thirds of the population is under the age of 36 and more than half is under 25, is another supporting factor for this view.
“Though people are making more cautious investment, the total number of traders opting for online trading is on a considerable rise,” said R. Kalyanaraman, senior vice-president of Sharekhan Ltd, India’s largest online brokerage firm, majority owned by Citigroup Venture Capital International and Infrastructure Development Finance Co. Ltd.
However, online volume has suffered a dent because of recent market volatility and negative market sentiment, Kalyanaraman concedes.
Sharekhan derives 60% of its brokerage revenue from online trading. In 2003, online trading accounted for just about 10% of total volume in Indian stock markets. While there were only 10-15 brokers empanelled for Internet trading with the exchange then, now there are around 300 brokers wooing Internet-savvy investors.
Overall investing, too, remains at a very early stage in the country, according to a recent study by global accounting and consulting firm Ernst and Young, which said that only 4% of India’s domestic household savings or just about 13% of its gross domestic product is being channelled to shares and debentures issued by companies.
“Online investing is still at a nascent stage in India,” said Sudip Bandyopadhyay, chief executive of Reliance Money Ltd, the country’s largest retail brokerage and a unit of Reliance Anil Dhirubhai Ambani Group. Bandyopadhyay expects the Internet-based trading to eventually take about half of the total stock market trading, in line with developed markets such as the US.
The highest online trade volume among emerging markets is in the Philippines, where about 55-60% of trades is executed online; analysts say the reason for greater acceptance of online investing in places such as the Philippines and Taiwan is because they had wider Internet connectivity years before India.
The biggest challenge in India remains better Internet connectivity. The earlier Web-based technology used for Internet trading has been replaced by specialized software, said Sunil Sahni of NEXGEN Financial Solutions Pvt. Ltd.
New software-based Internet trading gives real-time global data streaming rates to trader, which helps investors analyse market trends and helps in faster execution of trades. Earlier, investors making trade calls over the phone was more prevalent. However, in such cases, “the execution used to get delayed,” Sahni said.
“Now they can make online trade any time, any where on real-time basis.”
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First Published: Mon, May 12 2008. 12 11 AM IST