E*Trade plans to enter India

The Indian online equity trading business will see stiff competition, with E*Trade, one of the largest online share trading firms in the world, aggressively planning to enter the Indian capital market.

After taking a 34 per cent stake in domestic brokerage IL&FS Investmart, along with SoftBank last year, the board of Investmart last week chalked out plans to start its online business before the year end.

E*Trade's Jarrett Lillin, president and chief financial officer, and Mitch Caplan, CEO, have joined the Investmart board.

US-based E*Trade operates branded websites in 12 countries with 2.7 million households and 3.5 million customer accounts worldwide. It has a balance sheet of over $30 billion.

Hemang Raja, managing director and CEO, IL&FS Investmart, told Business Standard, "In a marathon meeting early last week, we discussed the future course of action to make inroads into India's online trading business. While the exact details of the cash required have not yet been worked out, E*Trade would be providing strategic inputs on the technology platform, software tools for the business, product positioning and marketing strategy. The approach would be to learn from the vast experience of E*Trade and deploy that learning and their expertise to the extent possible in the Indian context and aim for market leadership over a defined period of time."

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

According to data from the National Stock Exchange, five companies dominate the internet broking business and control almost 90 per cent of market share.

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

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

"Internet trading is growing and is a more scaleable business proposition now," said a senior executive at a domestic broking firm that has a strong presence in internet broking.