Online trading casts its Net wide

Web-based deals account for 5% of NSE volumes

Online trading has gained momentum, from just 0.5 per cent of the total traded volumes five years back, it now accounts for 5 per cent of the total traded volumes of approximately Rs 14,000 crore on the National Stock Exchange.

According to data from the NSE, five companies control almost 90 per cent of the market share in internet broking.

While Indiabulls and ICICI Direct have around 20 per cent of the share each, the other dominant players are Kotak Securities and Sharekhan.

The daily average online trading during July-September 2003 touched Rs 9848 crore against Rs 3,038 crore in January-March 2002, a jump of 219 per cent.

According to industry participants, the rapid growth in internet trading volumes can be contributed to the growing sophistication of retail investors, availability of reliable internet connectivity and sophisticated internet trading platform.

Gagan Banga, national sales and marketing head, Indiabulls, said, " The rapid growth in online trading volumes can be contributed to better internet infrastructure and sophisticated trading platform available. Also a lot of consolidation has happened among industry players with over 90 per cent of the total internet trading volumes cornered by a few top brokers. I feel internet trading is growing for us and its a more scaleable business proposition."

D Kannan, head of Kotakstreet.com, said, " Internet trading volumes has nearly doubled to 10 per cent of our total volumes in the last one year and I think the internet space will grow further with improved infrastructure."

Along with rapid growth in internet trading volumes, there is lot of consolidation happening among brokers with market shares of top five brokers going up from 7 per cent to 13 per cent in the last two years.

The market shares of top five brokers on NSE has increased from less than 5.9 per cent in 1996-97 to about 13 per cent during the year ended December 2003.

The market share of top 10 players on NSE has grown from 10 per cent to 16.4 per cent during the same period and the share of top 25 brokers has grown from 19.7 per cent to 29.1 per cent in the last five years.

The present development in the Indian market parallels the development in the US markets from 1970s to 1990s, where top five brokers such as Charles Schwab, Etrade, Merill Lynch, Dean Witter and Smith Barney rapidly expanded their market share and gained close to 50 per cent of the retail trading volumes.