Changing age profile, better connectivity help.

Many brokerage houses say that they are consciously moving towards online trading as the primary platform for retail clients.

Rajalakshmi Sivam

BL Research Bureau Retail investors are routing more of their stock market transactions through Internet accounts, data from the National Stock Exchange show.

One out of three trades on the NSE and a fourth of the exchange’s average daily turnover today originates from retail Internet trading platforms.

The increase in online trading, industry veterans say, is the result of higher participation by the young as well as better Internet connectivity.

Online trades accounted for just one-fifth of the total trades and 15 per cent of the exchange’s total turnover, in 2006.

Mr Manish Shah, Associate Director, Motilal Oswal Financial Services, said that the rising investor preference for trading online is the result of, “increased Net penetration, availability of broadband and of course the bull run from 2004 to January 2008.”

Mr Aditya A. Mehta of Asit C. Mehta Investment Intermediaries traces the popularity of online trading to the profile of the investors active in the market today.

“Increased participation of younger investors who tend to be more tech-savvy has helped,” he says.

If the investor is looking for hassle-free trading, broking houses too have been promoting online accounts aggressively.

One, it drastically cuts down on their cost of operations — both in terms of office space and maintaining a full-fledged dealing room.

Two, it allows them the flexibility to cut back if volumes dry up, in a corrective phase.

Mr Sandip Raichura, Head, Broking and New Initiatives, DBS Cholamandalam Securities, said, “The medium of the Internet is the ideal solution for financial services players — it allows for a scale up or a scale down depending on the market situation, while keeping costs low. Thus, most players provide implicit or explicit incentives to drive traffic online.”

Many brokerage houses say that they are consciously moving towards online trading as the primary platform for retail clients.

Incidentally, online transactions dipped less than traditional deals during market falls and staged a matching rebound.

When the markets fell sharply between January 2008 and March 2009, the number of online trades fell by just 7 per cent, even as overall trades fell 14 per cent. The rebound since March 2009 has seen online trades expand by 30 per cent even as market-wide trades saw a 31 per cent increase.

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(This article was published in the Business Line print edition dated August 23, 2009)
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