How RAIN democratizes algo and quantitative trading for retail investors


For most of the retail traders who have flocked to the market in the past couple of years, mutual fund have been a natural sanctuary. And this is because they not only offer people the opportunity to invest in instruments that are carefully managed by a fund manager, but are also seen as a relatively safer option that generates better returns for a population that has tied up his money in fixed and recurring funds. deposits and physical gold.

But for the average middle-class investor and new hire, mutual funds and instruments like government and corporate bonds, digital gold, etc. hardly move the needle in terms of wealth accretion, Says Harsh Agarwal, an asset manager and hedge fund operator who has been in the business for over a decade.

“Investing in mutual funds adds value to people who have millions of rupees and earn tens of thousands of dollars. Retail investors with a corpus of Rs 1 lakh to Rs 10 lakh will not really see any substantial added value by investing in mutual funds, even if they stay invested for the longer term… the returns they earn make a very marginal difference to their net worth, ”he adds.

The stock markets are the answer to this conundrum – and if you really think about it, that also makes sense. Every major investor today, from Warren Buffet to Rakesh Jhunjhunwala, has increased their wealth by playing in the market, whether through sentiment trading or quantitative trading.

It looks good and easy on paper. But a majority of Indian retail investors are young and do not understand the ‘share the mess’ completely. Even for the smartest and most educated investors, algorithms and quantitative trading is beyond their reach because you have to dive deep into the world of financial markets to really understand what the meandering lines on the many charts mean.

And while there are brokers, investment managers, and traders who can help you out, it’s a job and a half to research them, sign up with them, pay high brokerage fees and leave them behind. make financial decisions on your behalf.

Enter RAIN Technologies, co-founded in 2020 by Harsh and Raghu Kumar, who founded India’s second largest online trading platform Upstox.

An overview of RAIN’s market platform (Source: RAIN Technologies)

RAIN is a B2C platform best described as a marketplace for algorithmic trading strategies. It helps users who are already trading online using companies such as Upstox and Zerodha to connect their accounts on the platform, choose strategies published by various brokers from all over India and invest in these trading strategies. trading.

The online strategies marketplace platform launched in the first week of July this year, as part of a closed beta program. The startup tells Your story this has nearly 2,500 users currently on its waiting list, and processed more 7,000 to 12,000 orders worth 50 to 60 million dollars, Daily.

Make algo trading less scary

RAIN allows traders and asset managers to come and create multiple trading strategies on the platform – including setting up all kinds of automation – and selling them to investors. Investors, in turn, pay a Subscription fees for every strategy they subscribe to, that goes straight to the trader.

“RAIN is like the Netflix from the stock market. You scroll through various options and then choose one thing to watch. Likewise, you review hundreds of different trading strategies posted by traders from all companies, and you invest in the one you like the most, ”says Harsh Your story in an interview.

“Trading in algo, in particular, has a lot of advantages and benefits to offer investors – and we want to make that easy for the common man,” he adds.

Uses of algorithmic trading technological and IT resources making trading decisions, which can be a daunting task for novice traders with their limited knowledge of the financial markets. Traders, however, are well equipped to set up these automated trades based on a multitude of variable factors including price, time and volume.

Once users subscribe to a strategy, they are asked to log into their online trading accounts on platforms such as Zerodha or Upstox. All trade executions occur automatically after this, including any change in the composition of the portfolio.

“Our goal is to make hassle-free and palatable scary world of commerce“says Harsh.

Business model

RAIN currently has stock-based strategies on the platform, but it hopes to add cryptocurrency and global stocks to its mixture in the near future.

It generates income in several ways: a, as a percentage of subscription fees that users pay to strategists to subscribe to their models.

Second, from brokerage and trading companies that use the automation function of the RAIN platform to set up their own trading layers, but do not publish or disclose these strategies to the masses. Instead, they set up closed rooms for their existing customers, which they also embark on the platform.

General users can invest as little as Rs 10,000 in algo and quant strategies on the platform based on personalized factors such as risk appetite. The platform currently has more than 20 strategies running, which the startup primarily uses to gather feedback and put the product to the test.

Over the next month, he plans to onboard at least 10-12 editors, each with around 100 strategies.

The startup based in Bengaluru serves both retail and institutional investors, although retail investors are likely to find more value in the product. Its competitors include AlgoBulls, Tradetron Inc, and Algoniti, among others.

There are clear indications that retail investors are investing in the stock market on their own terms. An SBI report said the number of individual investors jumped to 142 lakh in FY21.

On the other hand, the share of individual investors in total turnover on the stock market rose to 45%, compared to 39% in March 2020, National Stock Exchange data showed – which essentially means that individual investors buy and sell almost half of the average daily trading volume on the exchange.

Clever technological solutions like RAIN, which automate and simplify the world of stock trading, solve very basic problems that those still on the fence about stock trading have – and there is ample room for such companies. Are growing.

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Edited by Teja Lele Desai

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