Mobile Trading Spikes As Retail Investors Flock To Equity Markets

Stock trading via mobile phones spiked during the Covid-19 lockdown as retail participation rose.

A passenger wearing a protective mask checks a mobile device inside a train in Mumbai, India, on Saturday, March 21, 2020. (Photographer: Dhiraj Singh/Bloomberg)
A passenger wearing a protective mask checks a mobile device inside a train in Mumbai, India, on Saturday, March 21, 2020. (Photographer: Dhiraj Singh/Bloomberg)

Stock trading via mobile phones spiked more than internet-based buying and selling of securities during the Covid-19 lockdown as retail participation rose.

Both are modes of online trading. While mobile trading is purely by retail investors, internet-based trading is either through broker terminals on behalf of retail clients or investors directly logging in from personal computers.

Mobile trading turnover in the cash markets jumped almost 9 percentage points to 23% since February, according to data by the National Stock Exchange. That compares with a 4-percentage-point rise to 13% for internet trading during the period when the majority of brokerages and traders worked from home.

Retail participation jumped during the lockdowns worldwide as ‘Robinhood traders’, a reference to those trading through U.S. discount brokerages such as U.S.-based Robinhood Markets, flocked the equity markets betting on a recovery after the worst selloff in more than a decade. India, too, witnessed a version of that and Indian brokerages are chasing new digitally savvy investors.

“I think there were plenty of investors waiting on the sidelines for a chance to start investing. And, with the work from home, people generally have time on their hands to think about investing and they seem to have started investing in the markets,” Nitin Kamath, founder and chief executive officer, Zerodha, told BloombergQuint. “Contrary to popular perception, there hasn't been any dramatic increase in the number of traders.”

Mobile trading has been growing in India, and it overtook internet-based trading in the cash market in October last year.

The share of mobile trading has always been high and will continue to remain and high, Kamath said. “Cheap smartphones and low-cost of mobile data have democratised mobile penetration. In our case, our mobile platform always had more users than our web platform.”

Mobile with the share of 23.4% as of June is the second-biggest trading contributor after colocation with 33.31%.

Colocation service, which allows traders and brokers to place services next to that of exchange’s, is used by high-frequency traders who use the advantage of a nanosecond to trade. But it’s largely used by large institutional investors.

Mobile-based trading is largely done by retail investors who don’t rely on sophisticated trading models or algorithms. And brokers have been chasing this category of investors, particularly from smaller cities.

Upstox, a discount brokerage operated by RKSV Securities India Pvt., now has more than 1 million users and aims to double the count by December.

“Over the last year, Upstox has on-boarded a large number of digitally savvy traders from non-metro cities,” Ravi Kumar, co-founder, said in a statement. “Over 80% of the total customer base acquired by the company is from tier-2 and tier-3 cities like Nashik, Jaipur, Guntur, Patna, Kannur, Tiruvallur & Nainital and among others. Currently, almost 75% of the total customer base is below the age of 35.”

NSE has 1.22 crore active clients of all stockbrokers combined as on June 30. Zerodha is the largest accounting for 15.9% clients, followed by ICICI Securities and RKSV Securities.

And as more investors flock to equity markets, shares of listed brokerages surged in the last three months. ICICI Securities, IIFL Securities Ltd., 5paisa Capital Ltd. and Motilal Oswal Financial Services Ltd. jumped 33-101% during the period.

ICICI Securities’ management said in a conference call said that it has launched an initiative to win new clients without any physical meeting. Vijay Chandok, managing director and chief executive officer, said in a filing, “We saw a continuing retail participation as a steep correction in such a short period of time provided many with an opportunity to enter the market at multi-year low pries in March.”