Regulator Sebi’s action to check excessive speculation in the stock markets might have dented growth targets of established stockbrokers like Zerodha, Angel One and Groww, but early-stage founders are still setting up new ventures in this space.Venture investors tracking this space mostly talk about the under penetration of the Indian equities market and the growth of the economy as the reasons for investing in new players, despite the known headwinds.
Former Swiggy chief technology officer Dale Vaz and Kotak Securities senior executive Manish Jain launched Sahi earlier this month. The company secured $7 million in equity funding from Accel and Elevation Capital.
Market Pulse Securities, a Sebi registered broker, launched technology platform Punch and raised a $7 million round earlier this year from the likes of Stellaris Venture Partners, Prime Ventures and others.“There could be around 10 crore Indians investing in the markets and within that there are around 5 crore active traders, as per NSE data… This market can definitely grow and technology will be able to solve this,” the founder of a wealth-tech firm said on the condition of anonymity.
However, industry insiders feel these early-stage startups could face an uphill climb in the race to grab market share, given the changing regulatory environment and the losses being reported by retail investors.Starting fresh
New-age founders, though, feel it is never late to start a wealth tech firm in India.
“Our aim is to create a level-playing field for retail traders… We are focusing on serious traders who are keen to make the right choices for long-term investing,” said Vaz of Sahi.
Being a trader himself for around 17 years, Vaz believes the Indian stock market needs new users and they can come in and trade for the long term only when they are equipped to make the right choices.
Sahi, with its focus on educational content, simplified charts and financials and an easy-to-use mobile-first platform, is hoping to grab a sizeable chunk of the new entrants into the stock markets over the coming years.
Amit Dhakad, cofounder of Punch, said regulations are being designed in a way that can actually make the Indian equities market more sustainable in the long run.“If there are investors who are taking a very short term two-three-year window (to enter the markets), then they might think differently, if the investors are looking at it from a 10-year window, then they are very bullish,” Dhakad said.
IndStocks, which is the broking arm of Gurgaon-based wealth management firm IndMoney, entered this arena only in November last year. It currently has 732,437 active traders, as per the NSE.“We launched stock trading last year to complete the entire gamut of investment services for our users, while we entered the market late, we have seen healthy growth in our active user base,” said Nikhil Behl, chief executive officer-stocks at IndMoney. “I think from here on, the trading base will further grow and with our advanced platforms, we can grab a significant chunk of that market.”
Tougher market
A report published by Sebi in September this year showed 93% of the over 10 million individual traders who traded in futures and options (F&O) incurred an average loss of Rs 2 lakh and above. Only 1% of individual traders managed to earn profits exceeding Rs 1 lakh after adjusting for settlement charges, the report found.
“The market has definitely gotten tougher… Some of the investments have happened as a part of conversations that might have started earlier and are closing now,” said a senior executive at a Bengaluru-based venture firm.He said F&O as a market segment will continue to remain a niche segment and there is limited scope for platforms to get more retail traders to generate healthy profits out of options trading.
Investors are also backing players who are building some offline distribution capabilities beyond online ones in a bid to diversify their bets.
ET wrote on November 21 that wealth tech firms ZFunds and AssetPlus, which both raised venture funding recently, are focusing on empowering offline distributors of mutual fund products.
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