Although 2016 has been called the year of fintech, technology — from that ping announcing the arrival of your salary, to EMIs being debited from your account, to paying bills with the click of a button — has been transforming and disrupting the financial landscape for a long time.
However, the startups that have been mushrooming in the space for the last couple of months are all set to transform the financial world and its dealings even further.
Joining this slew is MarketsMojo, a multi-algorithm-based financial investment analysing platform started by 42-year-old Mohit Batra and 47-year-old Joyson Thomas, the founding members of Moneycontrol.
While Mohit moved out from the post of CEO of Web 18 (post Moneycontrol’s merger with CNBC) in 2003, Joyson continued as CEO till 2015. Friends for a while now, the duo reconnected in 2014 and were surprised to find that they were thinking of the same product idea. The team also saw a strategic investment from Haresh Chawla, Managing Partner, India at India Value Fund Advisors Private Limited (IVFA)
“We got the initial team in place which had worked with us 15 years ago at Moneycontrol, and thus a homogeneous, like-minded group of senior leaders got together,” says Joyson. They began working on MarketsMojo 14 months ago and have started with their first product offering — an Indian stock market product for retail investors.
The team claims that their platform currently runs over 500 algorithms across 4,000 listed companies in India and sums them up on quality, valuation, and current financial trends. Joyson adds that while sell-side coverage on listed companies in India is under 20 percent, MarketsMojo covers all 100 percent listed companies from newest to oldest.
They also analyse all news, industries, expert recommendations, and impact of external environment via a complex matrix of algorithms. A client’s portfolio is analysed on seven parameters — returns, risk, liquidity, diversification, quality valuation, and current financial trends.
“All algorithms are backtested over the last five years and results are provided on the platform,” says Joyson.
In all, over 30 million data points are analysed daily, covering anything that may affect an investor’s decision-making process. The platform caters to direct clients and also as an integrated API for various financial intermediaries.
Understanding the market
In their 25 years of experience in the field, the duo saw that the equity penetration in India remained at three to four percent despite having great returns. With over 17 percent compounded annual growth rate (CAGR) over the last 15 years and long-term tax advantage, there is a vast majority of people still investing in gold, real estate, and FDs.
“The above may stem from either of two factors — investors are unwilling to take the risk or they really don't understand the risk-return paradigm of choosing right opportunities and hence sit on the fence most of the time,” says Joyson.
There are broadly two kinds of sources of this investor knowledge — brokers who are biased towards transactions and essentially believe in churning the portfolio, and friends and family tips.
While mutual funds has seen good growth at a penetration of 40 percent of taxpayers, it is still a small amount when compared to the overall savings pool.
Direct equity investing has still not taken off that well. All brokers combined, only 10 to 15 percent of Indian listed stocks are researched and that too is with over 70 percent duplication and biases towards institutional investors rather than real investors.
Cracking a complex subject
The team realised that the investor was wary of equity investing not just because of the risk associated, but also because of the lack of understanding of equity investing principles. It was then that the duo decided to build MarketsMojo as an unbiased investor empowerment and validation platform, where an investor can do his or her research without the fear of transactions being pushed.
“Our bias is towards retail investors and all our research reaches them first and foremost via various tools available on the site,” adds Joyson.
However, equity investments isn’t an easy subject to understand. The Indian listed market has over 3,500 listed companies and top brokers cover no more than the top 200 to 300 companies. Joyson believes that the biggest challenge was to create a business model which could cut across different industries and analyse all 3,500 companies. He says,
This took us the first three to four months to create a list of over 400 formulas that analyses every company’s financials, cash flows, balance Sheet, P&L, and shareholding, and then to backtest and see if this model is working backwards with all this analysis.
Also, due to the complexity of the subject, it was important to make the platform simple, directional, and crisp for all kinds of investors — from amateurs to experts — to understand the process.
All analysis is in the form of cards. Summary cards for every section come first and then an investor can scroll right for details on any section. The retail journey is from top to bottom where all the summary cards are stacked up, and experts can scroll from left to right for detailed analysis.
However, Joyson says that the biggest challenge was to get the right IT team in place, considering what they were trying to achieve was intense in terms of IP. He adds,
Plus, good IT resources are becoming too expensive and rare for startups. Since we have the right connect in the market and found an organisation of high calibre, intellect, and confidentiality to get the product out. Subsequently, after going live now, we are hunting for an internal team.
Revenue and competition
The platform went live in June this year. Since then the team claims to have seen an overwhelming response from investors. With zero marketing spends, the team claims the site sees close to 50,000 investors, who have also created their equity portfolio there, on a daily basis.
“This is now in excess of Rs 10,000 crore and we are seeing a growth of traffic of around 20 percent every week,” says Joyson. He adds that within three months of launch, MarketsMojo is an operationally profitable company.
He says that all their revenues come from integration of the content to other brokers and media companies. They don't charge the end investor anything.
With the increasing need to get people to invest in equity and stocks, there are firms working to create awareness.
Bengaluru-based Zerodha, which is bootstrapped and profitable, is one such firm. It claims to have memberships on all the stock, commodity, and currency exchanges in India. The team is believed to be one of the first in India to have disrupted the existing pricing structure by introducing a flat fee-per-trade model.
There also is the BullBear Device for traders, to help them access market data anytime, anywhere, in a legal manner.
Also, Joyson agrees that there are platforms like this available through Bloomberg, Reuters, and some brokers, but most come with a high cost as well as transactional biases. He says,
We have created this platform to make individual investors aware of their investment decisions and analyse them like an analyst does, cutting across heavy jargon and simplifying the same for common understanding. We also do fundamental analysis and momentum analysis which in the long run has lower risks of non-performance unlike trading algorithms. Investor empowerment is key to our proposition.
The platform has been created in a way that it can be made global fairly easily after customising it to local data, reporting patterns, and regulatory environments. It covers 100 percent of the market and researches every product class.
The platform has several brokers, banks, and news providers seeking such algorithm-based analysis as APIs to power their platforms. This forms MarketsMojo’s revenue model. The current API integration is in progress with two prominent financial services players in India — Kotak Securities and BloombergQuint.
The team is also in advanced talks with banks to integrate their portfolio analyser API for their internal customers to offer portfolio restructuring advice. The API is fully customisable to internal evaluation models of their customers’ own philosophies.
The team intends to vertically integrate all other asset classes in this solution model in India and provide client-centric investment solutions across products. They also plan to horizontally integrate Asia markets in the same way and then finally integrate other global markets
The team claims that the platform is fully scalable and everything comes out of the system.
“For us to launch any new geography with the same principal, it would take only 20 percent customisation and local data with time to market of around three months,” says Joyson.
The team is in the process of integrating other products like mutual funds, insurance, loans, FDs, PF schemes, and all banking products analysis and transactions and are working towards building a profitable financial services company.
MarketsMojo is also a part of Finovate 2016, a global event highlighting the fintech innovations of the year.
“MarketsMojo will now present its product to an audience of over 400 members of global press and institutions in Hong Kong on November 8, 2016,” ends Joyson.