FPIs increasing participation in Indian equity-derivative markets: SMC Global

Foreign portfolio investors' participation in the Indian equity and derivative markets is increasing on a daily basis while new Indian investors from tier-3 and tier-4 cities are set to create a significant influence in the domestic markets, says an industry expert.

"FPIs are banking on steady returns on their investments which is backed by the country's projected steady economic growth in the years ahead, we are expecting participation from new Indian traders to contribute significantly to the multi-fold increase in trading volume over the next five years,” said Ajay Garg, Director and CEO of Delhi-headquartered SMC Global Securities Ltd.

There is a lot of foreign interest in the Indian market, especially FPIs participating in high frequency and medium frequency trading, he said, adding that SMC was currently serving around 60 investment-loaded FPIs and more have lined up to become members of the group.

Garg said that SMC is working on capturing more FPI business, given that the company has registered more than 160 foreign stock and share traders on its platform, although it may take a while to get their commitment to contracted trade.

Currently, over 11,800 FPIs which includes 3,500 FPIs from the US, have invested in USD 1.1 trillion in Indian markets as per estimates, Garg stated.

“SMC is focusing on US-based traders as the NSE has obtained US Security Exchange class relief for index derivatives options contracts for trading in NIFTY and NIFTY Bank,” he told PTI.

The domestic investors, specifically the tier-3 and tier-4 mobile-savvy young traders are going to add significantly to the daily NSE-BSE volumes, benefiting from the wide reach of mobile-based apps, said Garg.

He expects the 10 other SEBI-approved trading houses, along with SMC, to roll out trading apps offering investment opportunities to youth across India, and even reaching out beyond tier-4 cities.

“Just as SMC is using technology to reach out to new Indian traders, we see other SEBI-approved trading houses increasingly use such apps for market penetration,” said Garg.
“Given that India has one of the fastest growing economies in the world, the outlook for equity and derivative markets looks very bright.

“But investor penetration by Indians in the financial markets is still nominal, at less than 5 per cent," he pointed out.

He also said that SMC has been enjoying 20.28 per cent CAGR growth in PAT over the last five years benefitting from its network spread across 425 Indian cities and serving from around 2,500 offices, including 2,300 franchise offices.