Technology makes it easier for investors in stocks and mutual funds

INDIANS ARE ALSO Traditionally large savers, investing in stocks had not been a preferred option for them due to the perceived risk and complicated process of dealing with stockbrokers and keeping records. But the ease of investing through smartphone apps is attracting a new generation to the stock markets.

The Upstox online stock trading platform, for example, is the second largest stock brokerage firm in India in terms of active clients and market share. Founded in 2009, the company reached the milestone of 10 lakh customers in June 2020. Since then it has grown 10 times and reached one crore of customers in May 2022.

The number of active dematerialized accounts (a demat account holds financial securities in digital form and is essential for stock trading) in India has more than doubled, from around 4.1 crore in March 2020 to 8.97 crore in March 2022. The total assets under management of the mutual fund industry have nearly doubled over the past five years, from Rs19.04 lakh crore in May 2017 to Rs37.22 lakh crore in May 2022.

The integration of the technology was a “very obvious factor” that drove the penetration of the retail market, said Narayan Gangadhar, CEO of stock brokerage firm Angel One. “It has become extremely convenient to participate in the stock market with mobile apps and web-based solutions offered by fintech platforms. Gen Z and millennials, who want it all at the push of a button, are leveraging the availability of stock market solutions on smartphones, “he said. Angel One has doubled its customer base since March 2021 and reached a crore of customers in May 2022.

Most online-only stock trading platforms do not offer advice or recommendations. “These are simply platforms for investors to come and trade in stocks or mutual funds,” said Vidya Bala, founding partner and head of research and products at Prime Investor, a research solutions platform for retail investors. . “Players like Prime Investor and Value Research offer investors research tips and tools.”

In the capital markets, there are distributors who sell products such as mutual funds, there are registered investment advisors who give paid advice, and there are research analysts who provide product-related recommendations. And they’re all making use of technology. MarketsMojo, for example, is a stock and portfolio research consultancy that uses big data and artificial intelligence to analyze markets and stocks for more detailed and unbiased research. It covers 21 global markets and has experienced 500% compound annual growth over the past three years. “We have seen a wave of new investors subscribing to model portfolio strategies,” said Mohit Batra, founder and CEO of MarketsMojo. “Currently, we manage nearly $ 800 million worth of portfolios, worth approximately Rs6,000 crore of portfolio subscriptions. Most of these subscriptions took place in the last two years ”.

Batra said there were two sets of service providers on the market. “Discount brokerage is based on a savings philosophy that investors should trade as much as possible with the lowest possible fees. The other service providers are tool-driven and concerned about the investors making money, “she said.

Despite the strong growth, the market is still poorly penetrated. Batra expects a big wave in the years to come as people are “anxious to know how to make money before they know where to make it or the platform to adopt”.

These platforms use artificial intelligence and deep learning to build customer profiles, research markets, and then build portfolios for customers. In addition to recommending stocks, there is also an analytics-based risk management system, which tracks the individual stocks held by a client; asks the customer when to sell. “Using AI helps combine time cues with data to deliver personalized recommendations,” said Gangadhar.

JarvisInvest, an AI-powered equity portfolio advisory platform, launched in 2018, but a full-fledged mobile application only launched in September 2019. It is not a broker, but works with 20 of the best brokers .

“How do you bring a portfolio management service or AIF (Alternative Investment Fund) category to a retail investor and deliver a hyper-personalized experience to each client? We have tried to fill this gap, “said Sumit Chanda, CEO of JarvisInvest.

MarketsMojo, on the other hand, wants to become an unlimited zero broker provider by charging limited advisory fees.

Innovative fintech products have attracted the attention of full-fledged brokerage firms. “We are constantly striving to provide our users with best-in-class products and services,” said Gangadhar. “So we have partnered with fintech platforms that can improve the overall investment experience for our clients.” Angel and many other brokers have partnered with Smallcase, a platform whose integration offers clients a curated basket of stocks or exchange-traded funds (ETFs). Likewise, the partnership with fintech Vested Finance helps its clients buy US-listed stocks and ETFs.

Young tech savvy people with a high risk appetite are the main users of these investment and advisory platforms. Batra said around 80% of the investors MarketsMojo acquired in recent years were in the age group of 24 to 32. Many of these investors entered the market in 2020 and benefited from a stock rally that started in April 2020 and lasted until the end of 2021. However, the markets were extremely volatile afterwards, due to rising inflation. and interest rates. Since their peak in October 2021, benchmark equity indices have fallen by more than 13%. It has not yet been seen how many of the new investors have the perseverance to ride this volatility and stay invested during a period of low or negative returns. At least some of them may make an informed choice and this is where these investment advisory platforms pin their hopes.

Leave a Comment

Your email address will not be published.