C.J. Punnathara

Kochi , Sept. 1

"FIVE years since Internet trading was launched on Indian bourses, volumes continue to be far below expectations," Mr C.J. George, Managing Director of Geojit Financial Services Ltd, said.

With the additional convenience and instantaneous transactions offered through net trading, privacy and absence of middle men between the investor and the exchange, it was predicted that Internet trading volumes would scale new heights during the first five years, Mr George, who had pioneered Internet stock broking in the country, said.

Geojit had said that Internet trading would grow to 25 per cent of the total trade volume of the exchanges by 2005.

The expectations had been that Internet trading would be the preferred route for retail investors, while the BSE and NSE terminals would remain the domain of the brokers. But neither the advent of Internet trading nor the recent peaks scaled by the exchanges have been able to attract the retail investors. The volumes in Internet trading might have shot up, but it still continues to be low as a percentage of the volume of business transacted at the bourses.

The retail investors had come in droves during the height of the IPO days, in the early nineties. But they left even faster after the scams, which gripped the market during the nineties. The retail investor found his biggest incentive and entry point closed after free pricing was introduced to new IPOs.

"During the last 10 years, there have been very few retail customers entering into the stock markets and this is truly reflected in the poor growth in Internet trading," Mr George said.

The spread of computers and access to Internet among the retail investors has also been below market expectations. Nor was the access to Internet trading exploited by the NRIs, as was envisaged at the launch of net trading on February 1, 2000. "This was partly due to regulatory issues and also the absence of capital account convertibility," Mr George said.

Then there is the comfort factor. The retail investor invariably wants a second opinion before he makes an investment and what better way than to route his transaction through his broker who will express his reservations or encourage him to make his investment.

Despite all these handicaps, Geojit remains bullish about the future of Internet trading in India. Around five to six broking companies in India capture 95 per cent of the net trading. The current platform used by Geojit for Internet trading is not scaleable. "We are still bullish on Internet trading in Indian stock markets and we are in the process of upgrading to a Reuters platform which is truly scaleable to meet the emerging market requirements," Mr George said.

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