How Algorithmic Trading Is Changing India’s Stock Markets
The approach or norms of Indian people to the stock market are on a quick transformation. While the old way was to place the orders manually, now the same is taken over mostly by computers and algorithms.
Algorithmic trading (also commonly known as algo trading) is about using programs to purchase and sell during automated trading. With predefined program rules set in the backend, the algorithm trading makes quicker decisions with factual information.
In India, April 2025 data from the National Stock Exchange of India (NSE) show that algo trades cover around 57% of equity cash trades. Additionally, according to a recent market-analysis piece, more than 60% of the entire Indian trading is now automated with algorithmic trading.
How Algorithmic Trading Works
Algorithmic trading has computer programs running with defined instructions. In simple words, programmes analyse the stocks, market trends, and real-time data to make the right decisions.
Arbitrage algorithmic trading takes advantage of small price differences for the same stock in two markets. Another one is market making to earn from the difference between buying and selling stocks. Further trend analysis involves computers to assess data and patterns in the market. In this category of algo trading, computer programs make multiple small trades to earn profits from price variations.
Each of the above-mentioned algo strategies uses automation in a very different manner. However, the aim to rely on computers and automation is to simplify, speed up, and make it faster, efficient, and profitable.
Growth of Algo Trading in India
Algorithmic trading in India has achieved popularity and adoption over the past few years. While earlier, automated trading was a luxury for big organizations, it is now available to general traders as well.
One big reason for this growth is the rise of broker APIs and low-code trading tools. Various platforms help traders create strategies with automated tools. Such tools and platforms make the lives of both beginners and experienced users easier.
Regulation Changes and Why They Matter
With algorithmic trading becoming the new normal, SEBI (Securities and Exchange Board of India) is bringing rules and regulations to make everything safer and transparent.
SEBI has been checking the APIs or frameworks behind these computer trading programs. It also bound the brokers to share transparent approaches and stay away from manipulations.
Effect on Liquidity and Volatility
Algorithmic trading has made it easier to buy and sell stocks quickly. With the capability to handle multiple traders in one go, the traders can experience less difference between buying and selling prices.
However, algorithmic trading can reach the same signal even while the prices are rising quickly. One should have proper knowledge and tools to take care of such fluctuating situations.
What It Means for Everyday Investors
Algorithmic trading comes with both advantages and risks, like reduced trading prices. However, with automated trading, the investors need to be very careful with the sudden price changes and more prompt trading. There are various Indian brokers that offer seamless tools to run automated plans and help in safe trading automation.
Conclusion
Hence, the algorithmic trading is redefining the stock market trends and practices in India. It offers a platform to compete with the global markets like the US, UK, and Singapore in automation and technology.
However, with the inclusion of computer systems in trading, there is a need for balance, regulations, and transparency. SEBI will keep monitoring the algo trading to keep the market safe and efficient for everyone.
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This analysis is for informational purposes only. Please consult a SEBI-registered financial advisor before investing.
– Chandan Pathak
Equity Research Analyst, StockYaari