India currently boasts 46 million internet users. With a steady growth rate of 8%, our country is the perfect example of a digital economy. The sudden surge of market growth rate is a product of the “digital economy”. The advent of digital technologies has helped in redefining the Indian share market significantly. High connectivity, instant access to trading accounts, multiple trustworthy applications for share trading and hundreds of blogs from market experts have helped in the transformation of the Indian share market.
There was a time when the trading and share market were formidable terms to the general population. Right now, over 18 million people invest in the equity markets. The numbers may seem weak to the new trading enthusiast, but that is about 80% more than the numbers that traded in 2010. Technology has enabled Indian citizens to take a plunge in the share markets and try their luck in investing in the equities. As a result, the market is experiencing an efficient allocation of capital that can generate enough value for the shareholders and the companies.
Here are the few ways the rise of advanced technology has shaped trade and share market in the recent years –
i. Computerized trading
Early in the days, there was no other way than contacting a market intermediary over the phone to bid, buy or sell the shares. The only way to find information on the rise and fall of share prices was by following the scrolling footer during the news telecast or reading the newspaper early in the morning. Either way, it was not easy to access the real-time price, market news, and Sensex updates. Trade execution and consultation with the traders took multiple phone calls. However, the introduction of the very first computerized terminals pioneered a change that fostered convenience.
ii. Websites, applications and online trading
As we have mentioned above, trading once required back-to-back phone calls between the broker and the clients for buying and selling stocks of a single company. Thanks to online trading, most investors, buyers, and sellers can now take care of their portfolios and handle their transactions all on their own. The online platforms not only allow them to take a look at the current market stats, but they also allow the users to buy and sell stocks as per the changes in market trends.
iii. Smartphones come into the picture
The first cell phones came into the Indian trading scene in the early 1990s. Even then, only the top-floor traders and their clients had access to mobile technology. The current digital boom in India has given every citizen with a decent monthly income access to smartphones. There are hundreds of dedicated applications for Android and iOSx that can inform them about the status of their investments, alert them about how to invest in share market and send them updates on the status of the BSE Sensex every morning before the trades begin. Smartphones and internet connectivity have freed investing from the physical limitations of home or office.
iv. Keeping track of personal finance
Several accounts and portfolio tracking applications have come to the forefront. A large number of banks have come up with e-wallets. Payment platforms like PayTM, BHIM and Tez have changed the way we have always paid vendors, transferred money between accounts and paid utility bills. They have also revolutionized the way we keep track of our savings, transactions, daily expenses and investments. Some integrated applications that act as wallets cum transaction platforms cum investment monitoring tools enable the users to track their accounts and investments upon multi-factor authentication.
v. The big role of big data
Several leading market analytics companies have started relying on big data. Such companies include the SEC (Securities Exchange Commission) in the USA and SEBI (Securities and Exchange Board of India). The analysis of massive volumes of data helps in the almost real-time prediction of market trends. In fact, the constant influx of data allows enough room for redundancy to reduce errors in market prediction and speculation. The big players of the market including the hedge funds, corporate banks, and retail traders rely on big data for measuring market sentiment and portfolio management.
vi. Social media in investing
When we first came across Orkut, we rarely thought that its successors would play such an important role in the market. Facebook, Twitter, LinkedIn and several popular blogging sites have become the Mecca for all modern traders. All social media channels provide fresh market news and covetable data to all the modern investors. Of course, the regular browsing and stalking on social media will not get you much information. You also need specialized tools for the analysis of real-time data.
vii. The rise of the algorithm army
How can we harp on and on about the rise of modern technology, without stress on the development of algorithms? Algorithms play the key role in deciphering the reason for the rise and fall of share prices. In fact, their programmatic rules help in the analysis of market volatility, prediction of market growth in the upcoming quarters, examination of the current trading volume. The integration of programmatic rules with artificial intelligence and machine learning has helped the human operators to make more informed decisions.
Apart from these 7 key changes that technology has ushered into our share market, we have experienced the advent of robo-advisors. There are multiple robo-advisors online that depend on verified algorithms like the ones described in point (vii). Along with the rise of programming and automation came the era of high-frequency trading (HFT).
In sharp contrast to the slow trading process that the Indian share market experienced before the early 90s, the integration of robo-advisors, AI-powered applications, and automated trading algorithms allowed the instantaneous buying and selling of shares depending on short-term but significant fluctuations of the shared values. Although HFT is highly risky, the lure of making a fortune is undeniable for many young traders, who exclusively rely on computerized smart-trading methods.