Ma­chines over man to help in stock se­lec­tion

Cus­tom-made stock ad­vice us­ing ar­ti­fi­cial in­tel­li­gence and ma­chine learn­ing is here


Ar­ti­fi­cial in­tel­li­gence (AI) and Ma­chine Learn­ing (ML) are the new buzz­words in the broking com­mu­nity. The larger bro­kers are us­ing these tech­nolo­gies to help their cus­tomers make bet­ter in­vest­ment de­ci­sions and get per­son­alised ser­vices of the kind of­fered by e-com­merce gi­ants such as Ama­zon and Flip­kart.

Sam­ple this: HDFC Se­cu­ri­ties uses AI to crunch num­bers of all listed com­pa­nies on dif­fer­ent fun­da­men­tal pa­ram­e­ters and of­fer a score to cus­tomers to help them take a more in­formed call. “If a cus­tomer wants in­for­ma­tion on a stock that our re­search team doesn’t cover, the ma­chines can still an­a­lyse the com­pany’s fi­nan­cials and dis­play re­sults that are easy to un­der­stand,” says Nand­k­ishore Purohit, head– dig­i­tal busi­ness, strat­egy, HDFC Se­cu­ri­ties.

Re­search is just one part of the AI and ML of­fer­ing. Stock­bro­kers are also us­ing these tech­nolo­gies to per­son­alise client ser­vic­ing, and to im­prove upon the ex­pe­ri­ence they have with their re­la­tion­ship man­ager (RM).

Al­ter­na­tive re­search tools: Bro­kers like HDFC Se­cu­ri­ties, Axis Se­cu­ri­ties and Reliance Se­cu­ri­ties of­fer al­ter­na­tive means of re­search us­ing AI, based on re­cent quar­ter data. Apart from pro­vid­ing a score based on fun­da­men­tals, HDFC Se­cu­ri­ties also of­fers a strat­egy builder for day traders. Based on a trader’s in­put, AI sug­gests var­i­ous strate­gies and prob­a­bil­ity of a trader achiev­ing the goal. The bro­ker also of­fers real time screen­ing of stocks that can show bear­ish or bullish pat­terns. A trader can se­lect a time­frame, say 15 min­utes, and see the emerg­ing pat­tern on any stock or in­dex. Axis Se­cu­ri­ties also pro­vides data based on fun­da­men­tals of all listed com­pa­nies such as price-to-earn­ings, earn­ings-per-share, and so on.

Reliance Se­cu­ri­ties pro­vides sen­ti­ments rat­ing (neg­a­tive, pos­i­tive or neu­tral) on a stock by track­ing 1.5 mil­lion sources of in­for­ma­tion. “Based on the price and vol­ume move­ment, the ma­chines sug­gest strate­gies to a day trader who uses tech­ni­cal anal­y­sis,” says B Gop­ku­mar, ex­ec­u­tive di­rec­tor and chief ex­ec­u­tive of­fi­cer, Reliance Se­cu­ri­ties.

Tailor­made ad­vice: Most bro­kers us­ing AI and ML are heav­ily fo­cussed on per­son­al­i­sa­tion. “Not all cus­tomers are the same. We have iden­ti­fied clients in three buck­ets – those who trade daily, short­term in­vestors, and long-term in­vestors. We tai­lor our of­fer­ings ac­cord­ingly,” says Amit Go­lia, chief busi­ness of­fi­cer, Axis Se­cu­ri­ties. Many other bro­kers fol­low a sim­i­lar ap­proach. Cus­tomers are seg­mented based on their trades. As a client’s trad­ing pat­tern changes, the ma­chine changes his pro­file in real time.

Ear­lier, bro­kers sent all re­ports and calls to all client. As they can iden­tify trans­ac­tion pat­terns now, they send only rel­e­vant rec­om­men­da­tions to each cus­tomer. If a per­son is a day trader, he re­ceives rec­om­men­da­tions for trad­ing calls. A per­son who is a long-term in­vestor is not sent trad­ing calls. In­stead, rec­om­men­da­tions based on in-depth re­search are sent to him so that he can hold those stocks for a long hori­zon.

Stock­bro­kers are also track­ing us­age be­hav­iour on the plat­form and cus­tomis­ing home screens and other of­fer­ings. Af­ter log­ging in, if a client first checks his port­fo­lio, next time on­wards his stocks ap­pear on the home screen. If he checks the sta­tus of an or­der, that is dis­played.

Then there are port­fo­lio-spe­cific sug­ges­tions and rec­om­men­da­tions. If, based on the bro­ker’s re­search, a stock in the client’s port­fo­lio doesn’t have any up­side left, an alert is sent of­fer­ing al­ter­na­tive stocks in the same sec­tor or cat­e­gory (large-, mid- or small-cap) along with the re­search re­ports on them. ICICI Se­cu­ri­ties pro­vides real-time and pe­ri­odic up­dates on com­pa­nies that are part of a cus­tomer’s port­fo­lio. “Re­tail in­vestors, typ­i­cally, don’t have the band­width to track cor­po­rate ac­tions in all the com­pa­nies they hold in their port­fo­lios. We, there­fore, pro­vide real-time and pe­ri­odic up­dates on changes in pro­moter hold­ing, large trans­ac­tions in­volv­ing in­sti­tu­tional in­vestors, ma­jor price move­ments, etc,” says Vishal Gulecha, head–eq­uity, ICICI Se­cu­ri­ties.

Talk, chat to or­der: Some bro­kers, like HDFC Se­cu­ri­ties, have in­te­grated their plat­forms with chat­bots and also with Google Home and Ama­zon Alexa. A client can talk to the chat­bot and ex­e­cute trades and get the in­for­ma­tion he wants. Axis Se­cu­rity is await­ing ap­proval to of­fer trad­ing on chat ser­vices like What­sApp. The same fa­cil­ity can also be of­fered on Face­book Mes­sen­ger.

Re­plac­ing re­la­tion­ship man­agers: Many stock­bro­kers have a large client base, but the pro­por­tion of ac­tive clients could be low. Us­ing AI and ML, they are able to ac­quire new clients and in­crease en­gage­ment with ex­ist­ing ones. Many mil­len­ni­als want to buy shares and hold them. They want the trans­ac­tion to be sim­i­lar to shop­ping on the in­ter­net — se­lect the prod­uct, de­cide the quan­tity, and pay. Bro­kers are try­ing to repli­cate this ex­pe­ri­ence on their plat­forms. But there are many who pre­fer a re­la­tion­ship man­ager (RM), who un­der­stands their pro­file, avail­abil­ity, stock pref­er­ences, and so on. “Use of AI and ML can be in­tu­itive and free of hu­man bi­ases. Chat­bots have al­ready re­placed many of RM's func­tions,” says Gop­ku­mar.

While these are wel­come de­vel­op­ments, do keep track of your port­fo­lio to en­sure that these AI and ML based rec­om­men­da­tions help you make money.

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