Is brokerage industry keeping pace with retail trade?

The Covid-19 pandemic brought about a meteoric rise in the participation of retail investors in the Indian equity markets. Data from SEBI reveals that around 39 lakh new demat accounts were opened in the six months leading up to June 30, 2020. Another report indicates a rise in retail trading volumes from around 40% in March 2020 to about 70% in August 2020. These statistics reinforce the fact that retail investor participation has increased multifold during the pandemic.

How is the brokerage industry handling this spectacular spike in retail trades? A closer look at the industry reveals how surprisingly well it has adapted to this surge. When it comes to dealing with increased retail participation, it appears that the industry is quite ahead of the curve.

Here’s how the country’s stockbroking houses have adapted to this recent wave.

Investor-friendly products

Considering the astronomical spike in the demat account openings in a span of just a few months, it is quite evident that the number of first-time investors is on the rise. Driven by this, brokerage houses are offering an extensive range of investor-friendly products and services that are geared more towards first-timers and beginners.

Several complimentary advisory and research services have come up to help first-time investors make intelligent investment decisions. To simplify investments, portfolio management products, and services, which leverage the power of automation and sophisticated quantitative financial models, are also being offered. Such initiatives are not merely user-friendly; they also make trading and investment much easier for investors who are just starting on their journey.

Tech-oriented features

Millennials are currently flooding into the markets. This new segment of the investor base is quite unlike any others that brokerage houses have previously catered. They are tech-savvy, and they expect the same level of technological integration from their service providers.

In a bid to respond to this drastic shift in the consumer base appropriately, brokerage houses in India are focusing on integrating cutting-edge technology into their products and services. While some have partnered with fintech companies, others have developed tech-driven products and services inhouse to attract tech-savvy millennials to their platforms.

Brokerage houses are now offering a host of tech-oriented products and services with the sole motive of appealing to this new segment of retail investors. Automated trading platforms that are fully customizable according to the investor’s needs and risk profiles are perfect examples of how the brokerage industry is building a tech-fuelled ecosystem.

Global options

In addition to participating in the Indian equity markets, an increasing number of Indian retail investors have started to express interest in foreign stocks. More specifically, Indian Investors seem to be eyeing US tech companies such as Amazon, Netflix, Facebook, Apple, and Google.

The increasing entry of millennials in the retail investor space has paved the way for a rise in demand for global investing. These investors are aware of such companies and their products. Many millennials are actual users of the services of these US tech companies and therefore, better understand their business model and future growth potential.

To cater to the ever-increasing interest in global investment options among the Indian investors, brokerages are now quickly equipping themselves to offer trading facilities in overseas securities markets.

Investor education

Since a majority of the newly added retail investor base that’s flooding the markets includes first-timers and beginner investors, it is imperative to educate them about the financial markets. Many brokerage houses have stepped up to meet this requirement and are leading the change when it comes to investor education.