NSE cash market trades on cell phones up 10x since 2014, BSE deals up 20%

Data penetration has helped lower costs for brokers as more customers go mobile

The proportion of cash market turnover attributable to mobile phones is up more than ten times in the last five years; a rise which has come on the back of higher smartphone penetration, lower data charges and booming stock markets.

The share of cash market trades carried out through mobile phones was under one per cent in May 2014. It has risen to 10.51 per cent on the National Stock Exchange (from 0.9 per cent in May 2014). On the BSE, it rose by 19.5 times, up from 0.3 per cent in May 2014 to 5.84 per cent in May 2019.

A similar increasing trend is seen in the derivatives market, where for example, mobile share is up from 0.5 per cent to 3.94 per cent on the NSE. Some report significantly higher figures.

“For us, 60-65 per cent of total transactions are done through mobile. We were doing 25-30 per cent earlier and are now doing over 60 per cent. Mobile is contributing a lot even to our business where active traders like to use desktops. India is probably the first country in the world where people are going mobile first for the internet. The trend is going to continue, and mobile is significantly influencing the way people trade. The number of call in trades has reduced over the years,” said Nithin Kamath, founder and chief executive officer at discount brokerage Zerodha Broking.

The head of another broking firm said that mobile-based trading accounts for between 15 to 18 per cent of the revenues of major brokers. This also results in significant savings in costs.

“You do not have to call customers…your transaction cost is very high when you do it through a dealer,” said the person.

The increased share of mobile trading, a mode favoured by retail investors, comes even as the stock markets has risen to all-time highs. The benchmark S&P BSE Sensex crossing the 40,000 level in May 2019, up over 75 per cent from its May 2014 opening level of 22,493.59. Data costs have plummeted at around the same time, bringing more people on to cell phones.

There has been a 95 per cent decline in data costs since 2013, according to a March 2019 report by a division of consulting firm McKinsey & Company in its report entitled, ‘Digital India: Technology to transform a connected nation’.The absolute number of people with access is expected to rise further.

“Based on current trends, we estimate that India will increase the number of internet users by about 40 percent to between 750 million and 800 million and double the number of smartphones to between 650 million and 700 million by 2023,” said the McKinsey report from authors including Noshir Kaka, James Manyika and Shishir Gupta.

But interestingly, an increasing number of people prefer to make their investments through mutual funds and other institutions. This has led to increased institutionalisation of the market, a trend which may result in a lower overall share of retail investors in the market. This would be in line with what has happened in more developed markets.

“It looks likely over a period of time,” said Amnish Aggarwal, head-research at Prabhudas Lilladher who deals with institutional clients.

This by extension would mean that the share of mobile phones would also have a ceiling, since mobile phones are not used for trading by institutional investors.

Foreign portfolio investors accounted for 25.1 per cent of the total market capitalisation of listed companies as of March 2019. Domestic institutional investors accounted for another 13.6 per cent.