Status Of India’s Forex Market - Growth And Its Reasons

Several available statistics point to the fact that the market is really growing. But what are the factors fueling the growth?

India’s foreign exchange market continues to draw the attention of many research institutions. Just recently, IMARC Group valued the market at $30.7 billion and projected that it could grow by a CAGR of 8.8% to reach $65.8 billion in the next few years. In another place, the Economic Times noted that the country’s forex reserves had increased by $7.02 towards the end of August 2023. All these statistics agree that the market is growing. But what are the factors fueling the growth? Well, it’s not unreasonable to ask such questions, and thankfully, you will find answers in this article. So, let’s not waste any more time but get into the meat of the subject right away.

Understanding what forex is and how it works:

Perhaps you’ve heard about the buzz around forex, but do you know its nitty-gritty? Thankfully, there are numerous sources online where you can find in-depth knowledge about this. For example, a platform like Exness Insights offers a vast library of information, including trading strategies and weekly market outlook, among many others. So, taking advantage of such can really help you improve your knowledge about foreign exchange.

Forex, short for foreign exchange, basically involves trading currencies electronically over the counter. There is usually no central marketplace, with the main markets opening 24 hours a day, five days a week. The whole idea is based on anticipating shifts in currencies and capitalising on them to stay ahead.

For instance, if it seems as though the US dollar will gain in value against the Indian rupee, you buy it to sell it later at a higher price. Something else you may perhaps have heard people use forex for is hedging. Especially for businesses operating in more than one country, forex might be a convenient hedge against losses caused by shifts in exchange rates.

Are forex and crypto similar?

The forex vs crypto debate is common, especially among beginner traders. Well, someone might think that just because all the markets are usually available 24 hours a day, they are the same. But, interestingly, there are striking differences between the two. For instance, as much as both markets are available 24 hours a day, forex is only available for five days, while crypto is available for seven days.

Most importantly, forex is based mainly on traditional financial currencies regulated by individual countries. Crypto, on the other hand, is based on decentralised chains that make centralized regulation impossible. Another intriguing difference is how the markets diverge in terms of price influences. In forex, economic and geopolitical events are major players; in crypto, prices are mostly affected by tech developments and adoption rates.

Tech advancements that may affect India’s Forex sector

The widespread popularity of the internet: Internet advancements have really changed a lot – not just in forex. Take shopping as an example. Assuming you wanted to buy a refrigerator, where would your purchase journey most likely start from? In most cases, most consumers will start by researching online. Actually, according to statistics, close to 81% of buyers survey products online before buying. And, of course, this is so largely because of the convenience of online platforms.

If you can remember, forex in the early days mostly featured large organizations. Barriers to entry were so high that individual investors could not participate. But the widespread popularity of the internet—not only in India but worldwide—has made forex trading readily available to individual investors.

And you may be surprised to discover that India has previously ranked as the world’s second-largest online market, accounting for more than 900 million internet users. Even though at a national level, the penetration rate is slightly above 50%, further spread might contribute to the growth of the country’s forex market.

Artificial intelligence: Can you think of a sector where artificial intelligence has not made an impact? It’s nearly impossible to name even one. Surprisingly, some studies show that India leads in AI adoption at 30%, exceeding the international average of about 26%. AI boasts a high computational ability that is capable of crunching enormous amounts of data into meaningful insights in real-time.

The best part of this technology is it is not subject to human emotions, which can be a great undoing for traders. Almost all experts normally discourage following emotions while trading. Remember, forex requires some critical analysis of different aspects, and you cannot just depend on your adrenaline to make sober decisions. Since AI lacks that emotional aspect, it can make unbiased decisions, which is why a good number of traders are turning to it.

You may also have noticed some traders using AI tools to automatically execute trades. Once the tool identifies an optimal opportunity in the market, it can execute the trade, reducing the chances of losses that come from delayed responses. One of the great appeals of this technology is its ability to monitor market conditions in real-time. Given these benefits, we may see more Indians joining the industry.

Mobile technology: We use mobile devices for almost everything, from shopping and streaming to paying bills – the list is just endless. And the good thing is that you can do all these even on the go. However, you don’t want an inconsistent experience just because you used your smartphone to access these services. Realizing this, forex platforms have been adjusting their designs to suit mobile use.

This makes forex markets readily available so that you don’t have to wait until you are at home before you can trade just because you didn’t carry your laptop. By the way, do you know that responsive design has become the new norm? According to Hostinger, more than 90% of websites globally have already implemented responsive designs.

So, seeing Indian-based forex providers offering such experiences should not surprise you. Plus, now that a considerable number of investors might want to place trades on the go, taking advantage of responsive designs can help a platform differentiate itself. And it follows that if traders find a lot of such platforms, the market size could expand significantly in the coming days.

Parting Words

As complex as the Indian forex market is, many experts agree that it is on a rising trajectory. Just recently, the reserves hit an all-time high of more than $680.69 billion. More people have been joining the sector as technologies like mobile make the markets more available.

Plus, India is among the countries with the largest number of internet users, providing good grounds for the penetration of forex markets. The limitations of yesteryears, when only a few organisations could participate, are now eliminated; more individual investors are joining because of tech improvements. And since we are just at the infancy stage of these developments, we may see the industry grow even further, just as studies have projected.

(This article is part of IndiaDotCom Pvt Ltd’s Consumer Connect Initiative, a paid publication programme. IDPL claims no editorial involvement and assumes no responsibility, liability or claims for any errors or omissions in the content of the article.)