IndiaInfoline Winding up Retail Broking
Landscape of retail broking in absence of these pioneers?
Traders,
Indiainfoline, India’s largest retail brokerage firm announcing its decision to wind up retail broking has come as a shocker on the back of the recent announcement from HSBC shutting down their retail brokerage business after buying it form IL&FS a few years ago. Indiabulls, over the last few years, has also moved its focus completely away from retail broking.
IL&FS Investmart was among the first to make internet trading popular in India followed by Indiabulls and Indiainfoline who took it to the masses and built a vast business empire from the retail broking revenue. Knowing that these pioneers of retail broking in India would probably not be competitors in the near future will make the landscape of retail broking very interesting.
The recent announcements also probably explain the reason for a status quo in terms of technological advancement in the retail broking space over the last many years, the big brokerages of the past are no more looking at the retail business as their primary source of revenue and have completely stopped expenditure on R&D, technology or offering innovative products. When we decided to start Zerodha over 4 years back, we had 2 reasons:
1. Firstly, we knew that the way Indian brokerages were pricing was outdated and not in sync with how it was in the developed markets. If, in an online environment, the cost of executing a trade doesn’t go up with the size of the trade, then why should the charges go up? Hence we started the business charging only Rs. 20 per executed order irrespective of the size of order. This way of pricing is also called discount broking.
2. Secondly and more importantly, we realized that other than probably Indiabulls/Indiainfoline/Sharekhan putting up online platforms in the early 2000’s, there has been no innovation in terms of tools or platforms that traders in India have access to. Traders in most developed markets are a lot more professional but the reason is because they have access to those professional tools which give them an important edge to win. Using Technical Analysis while trading improves the odds of winning significantly, mainly because most indicators would never let you go against the trend – the biggest reason for traders to lose money in the markets. Though Technical Analysis is sworn by professional traders across the world, none of the platforms in India can help you for example write and backtest strategies before going live on multiple strategies to diversify your risk and also increase the odds of winning. This is one of those chicken and egg situations, since platforms don’t give you an option to do so, most people in India don’t know or follow backtesting before putting money on their strategy.
I hope it never happens, but what if zerodha decides to shut down it’s brokerage business? What will happen to the shares I bought for long term and kept in my zerodha account?
Mohit, if we do decide to ever shut the business down. You will get an option to transfer all shares to any other demat of yours. We will not be allowed to close down, until you have moved your shares to another demat. But like u said, it should never happen 🙂
“Though Technical Analysis is sworn by professional traders across the world, none of the platforms in India can help you for example write and backtest strategies before going live on multiple strategies to diversify your risk and also increase the odds of winning. This is one of those chicken and egg situations, since platforms don’t give you an option to do so, most people in India don’t know or follow backtesting before putting money on their strategy.”
WE have a tool called algoZ, pretty basic though.
We are also currently working on a new platform that will hopefully match the interntational standards in terms of coding and backtesting strategies.
Thanks for the suggestion and hopefully should have a solution for you soon.
Cheers,
Hi Nithesh,
You can visit http://www.traderscockpit.com They provide Intraday Charts for free on all NSE stocks with all the technical indicators.
You can also subscribe for the backtesting tool there for validating your technical strategies.
Cheers
The decision of “IndiaInfoline” is an expected one.
The businesses are started and are raised to higher level and with this the aspect of cost and returns always mismatch as far as a business as “trading” is concerned.
Trading/Investing in markets is actually not profitable for “ALL- ALL THE TIMES”
We consider common items of life as salt.grain.tea coffee- are such businesses which have stood test of time and have very long cycle of reversal ….In such businesses the people consuming the items do not face the risk of loss which is commonly felt in a business as trading or investment and is applicale to all even if the investor or trader is a seasoned one.
When such businesses are started which have the probability of success less than “ALL”-The business is done on per “LIFE” of “years ” basis.i.e Lets say average age of an Indian IS 30 YEARS and he starts trading/investing and if after 5 years he is fade up with the losses then he will quit it and may not look at it for years unless he again feels interested in the same.But at the same time a new breed enters the same and it continues ….So very few people remain in trading or investment for a very long period of time but at the same “entry and drop out” is a CONSTANT factor.
India is an absolute market as far as trading or investment is concerned where literacy of trading or investment is the least and this gives importance to the illiterate class of traders to survive with minimum losses.
SO THE BUSINESS IMPORTANCE IS TO THE ILLITERATE CLASS TO SURVIVE AND THEN TO THE LITERATE CLASS
All these brokerage houses have focussed on volume traders and these “volumes” have never allowed newcomers like us to trade at the ” ACCEPTABLE” cost which hampered their growth.
Further if acceptable losses are incurred,then survival rates also will be higher…But in vain, the brokerage houses did not focus on that.
RESULT IS “TODAY”
The restrospective simplicity of “failures” in brokerage business is that the business is:
1.paradoxical in nature where a businessman is expected to deliver” BEST AND LEAST”(Which is the case of perhaps every business) -BEST ARE WHAT NITHIN HAVE STATED AS TECHNOLOGY,TOOLS ,SUPPORT ETC AND LEAST ARE THE COST.
2.Businesses need to operated at the least cost in the growth phase at all the times.
3.With the initial phase of expansion say after 5 years corporate lethargy breaks out and new ideas are difficult to be “seen” which anyway hampers the existing and new base of customers.If new ideas cannot be “seen”, implementation and benefits to the customers is a far away scenario.
4.Fresh ideas can come from fresh people which have to be admitted again and again and management at the top need to admit and execute that.
Else the dominant forces of the market will implement fresh ideas.”ZERODHA ” have proved to be one such dominant force.
Today is a great phase for Zerodha and all our wishes are with them for their growth as We have huge population with fast pace of urbanisation and infrastructure and huge scope for every one to trade or invest and penetration of our investments is at the least levels for the population as a whole.So an idea as “ZERODHA” WILL DEFINITELY find its way ahead
ALL THE BEST
Very well written Chintamani and thanks for the good words.
Cheers,
Nithin
Hi nithesh there is website which help you track stock market back testing data for last 5 years.Visit http://www.tradewithme.me/historical-data.html
Test data and become pro in markets.
thanks
Preet
Hi Nithin Sir,
Thanks for the Post. In India, main problem is there is no Technical Charts or Backtesting available or it is very costly. But , If you see http://www.netdania.com , that free website will give Technical Charts for all the major currencies (EURUSD, GBPUSD, Gold, Silver, Crude Oil, DowJones, Nasdaq stocks. Also, Live Charts.. I can see hourly, 2hr, 4hr, 8hr or minute charts also. I can backtest my strategy for the past one year also. Similarly, GCI trading one forex trading company is providing these charts for free with all the technical indicators. Now, I am very much familiar and very much confidence with that market after doing my analysis and backtest with those charts. But, In India If Amybroker providing charts is it is very costly. I think somewhat less charge is Icharts only. If anyone give charts for free or for small amount , it will be very useful for the retail investors also to understand markets and charts. Please look in to that sir to provide free charts with all indicators and backtest available. Thanks.
Nithesh
dear nitin,
it is really strange now i think so that your vision for future is correct .
but move further with precaution step by step .
time is good ahead. our
Wow, another one bites the dust… I guess old is out and the new is in, thanks Zerodha for ushering in a new age of broking services 🙂