India doesn’t need smarter trading bots. It needs 500 million SIPs.

We Have Seen This Movie Before

The technology industry wants you to believe that artificial intelligence will be the great equaliser in investing. Algorithms will replace expensive advisors. Robo-advisors will give a farmer in Vidarbha the same financial planning a Worli banker gets. AI-powered trading bots will level a playing field that has been tilted towards institutions for decades.

It’s a nice story. We have heard it before.

When discount brokerages and zero-commission trading apps arrived, the promise was identical. Democratise access. Empower the small investor. Break down the walls of Dalal Street. What actually happened? The number of individual F&O traders nearly doubled — from 5.1 million in FY22 to 9.6 million in FY24. And 93% of them lost money. The total damage exceeded ₹1.8 lakh crore over three years. In FY25, individual traders lost another ₹1.06 lakh crore. Nine out of ten ended the year poorer than they started.

Access was democratised. Losses were democratised. Wealth creation was not.

The Invisible Takeover

Most people don’t realise it, but AI is already inside how India’s markets work. Algo trading accounts for over 70% of volumes in some segments on the NSE. Platforms like Smallcase, Groww, and Kuvera use AI to nudge millions of users towards specific mutual funds. Zerodha’s Nudge framework — perhaps the most thoughtful use of AI in Indian retail finance — actually warns users before they make bad trades. That’s rare. Most platforms want you to trade more, not less.

SEBI has noticed. Its new algo trading framework, fully mandatory from April 1, 2026, requires every algorithm to carry a unique exchange-assigned ID. Brokers are now accountable for every algo running on their systems. Black-box strategy sellers must hold a SEBI Research Analyst licence. The regulator is not fighting AI. It is trying to put guardrails around it before the next wave hits.

India’s robo-advisory market is about $500 million today. It is projected to grow at 33% a year through 2034. Globally, robo-advisory assets have crossed $10 billion. But for context — in the US, Vanguard’s digital advisor alone manages over $300 billion. India is barely getting started.

And yet, the part of this conversation that everyone ignores is also the most important. The biggest value AI can create in Indian finance is not in stock-picking. It is not in trading. It is in financial literacy.

The Right Rails, The Wrong Passengers

India has the digital infrastructure that no other emerging market has. But infrastructure without understanding is a dangerous combination.

Look at who is actually trading in India’s most complex instruments. SEBI’s data is uncomfortable reading. 75% of individual F&O traders had annual incomes below ₹5 lakh. 43% were under 30. More than 72% came from beyond the top 30 cities. And despite losing money year after year, three out of four kept trading.

These are not people who need faster tools. They need better judgment.

AI is very good at certain things. It can screen thousands of stocks in seconds. It can scan earnings transcripts and flag sentiment shifts before a human finishes reading the first paragraph. It can monitor global news flow around the clock. These are useful tasks. They are also the easy parts of investing.

The hard parts — the parts that actually determine whether you make money over a decade — are different. Understanding how a business owner behaves when things go wrong. Recognising when everyone in the market agrees on something and that agreement itself is the risk. Having the patience to sit on cash when markets are running and every instinct says deploy. These are not data problems. They are temperament problems. And no algorithm has temperament.

Give an untrained investor an AI-powered screener and you have not made him a better investor. You have given him a faster way to act on the same bad instincts. The people who will benefit most from AI in investing are the ones who already have the discipline to use it well. For everyone else, it is just a more sophisticated way to lose money.

The Next Frontier Is Not Trading. It’s Trust.

SEBI has been ahead of the curve on algo trading. The new framework — unique algo IDs, broker accountability, mandatory RA registration for black-box sellers — is exactly the kind of proactive regulation that most countries have not even attempted. India’s regulator moved before the problem became a crisis. That deserves acknowledgement.

The natural next step is AI-driven investment advisory. This is where the landscape is evolving fastest, and where the regulatory framework will need to evolve with it.

Thousands of finfluencers already use AI to produce market “research.” The output looks impressive — charts, data points, confident assertions. It takes minutes to generate. Much of it sits outside any regulatory perimeter. AI has made it very easy to look like an expert. The distance between looking like one and being one has never been wider.

When a platform’s algorithm recommends a mutual fund based on your risk profile, is that advice or information? When a chatbot suggests rebalancing a portfolio, where does the accountability sit? These are questions that every financial regulator in the world is grappling with. India, given SEBI’s track record of moving early, is better placed than most to answer them.

The Securities Markets Code introduced in December 2025 already recognises robo-advisory platforms — a meaningful step. The next layer will likely need to address transparency in how algorithms make recommendations, accountability structures for AI-generated advice, and data privacy in a system where financial apps already know more about your spending habits than you do.

Getting this right before the next bull market matters. Bull markets attract new participants. New participants are the most receptive to AI-generated advice — and the most vulnerable when that advice carries no responsibility behind it.

The broader picture is straightforward. AI in Indian finance is not a question of whether — it is a question of what kind. If it shows up mainly as faster trading tools for people who should not be trading, slicker content for unregistered advisors, and opaque algorithms pretending to offer personalised guidance — then AI will widen the gap between the informed and the uninformed.

If instead it shows up as financial literacy at scale, regulated advisory services, and better surveillance tools for the regulator — then India has the infrastructure, the demographics, and the regulatory willingness to build something no other country has.

India did not build UPI by copying Visa. It leapfrogged. The same possibility exists in AI-powered finance. But only if we are honest about what AI can do, what it cannot, and who it is actually helping.

That answer will decide whether the next decade creates 500 million new investors — or 500 million new casualties.

Nakul Sarda is the Founder of ProfitGate Capital Services LLP, a SEBI-registered Portfolio Management Service (INP000008233).

Disclaimer: Views expressed are personal and do not constitute investment advice or a recommendation to buy, sell, or hold any securities.