Using Google Trends and Correlations for stock trading insights?

Google search very often reflects consumer behavior, but stock trading? Well, yes!Kotak 11

Mumbai based brokerage Kotak Institutional Equities has put out a report, which goes with a disclaimer that no “Googler was harmed in the making of the report.” Its interesting that a brokerage would do some thing like this. But then if you really think, its quite obvious why they should be doing it.

Wall Street folks are known to do some really interesting stuff to get information on how companies are doing. Paul Singh of 500Startups talks of a couple of really interesting ways the Wall Street gets information from. Financial services company UBS uses satellite pictures to analyze parking lot fill rate at Walmarts in the US to predict how the retailer is doing and decide on which way to bet on the retailer. A company called Genscape, flies a small helicopter over oil tanks in the US to know how much oil is there in the market! That’s how desperately traders look for information. The Kotak team has put Google trends and Correlation to good use and come up with a report which sheds light on consumer trends and interests.

This is something data journalists should do as well. It gives some great insights to brands, what people are interested in and how one things leads to the other. It could be a powerful tool in the hands of marketeers and startups looking to discover consumer insights. For a brokerage, it could provide valuable insights into sectors and help them with demand forecasting.

Why is Google search data useful?

While the average Indian spent about 3% of his time on online activity to search and navigate, he spent  about 20% on Google Sites, the report points out. Google is not just a search engine: It has evolved into a content provider that engages the internet junkie beyond search, as well. With over 120 million Internet users, the sample size is very large.

Insights from Google Trends, what they found

Indian IPOs: Bharti Infratel, Lovable get some buzz

Bharti Infratel topped the charts in terms of search volumes but Lovable (lingerie) and PC Jewellers got similar attention. Curiosity over recent IPOs was miniscule compared with the likes of Reliance Power, Coal India and even MOIL.Kotak IPO

Scam and corruption – Concerns regarding scams ebb

Kotak Scams

The public concern regarding scams and corruption has ebbed back to its normal levels. With regular bouts of underhand activities surfacing in the recent past, there is a relative lull online on these two issues currently.

Home-loan hunts on the downtrend

Kotak Homeloans

India reduced its hunt for home loans since CY2010. The search trend suggests the proportion of regional traffic looking for ‘home loans’ has fallen to CY2008 levels even as other forms of loans are stable. Mumbai, Noida, Gurgaon and Bangalore generate the largest search volumes on home loans.

Luxury cars: BMW reigns supreme, Audi overtakes Mercedes

Kotak Car BMW

BMW leads the way in terms of search volumes compared with Audi and Mercedes in India. The brands’ reach online has consistently overshadowed that of its peers recently. Gujarat, Haryana and Punjab generate the largest queries on all these luxury car brands. Kerala surprises by being the biggest searcher for the Beamer.

Indian auto makers: B2C categories generate higher online fanfare

Kotak Car

The B2C segment of Indian car makers generates higher search volumes compared with Tata Motors and Mahindra and Mahindra. In the two wheeler space, googling for Bajaj Auto is most seen in Mumbai and Delhi. Bhubaneswar and Hyderabad seem to have a similar affinity for Hero.

Beauty products: Hair color over sunscreen

Kotak Facewash

Among the four beauty products Kotak analyzed, hair color supersedes sunscreen, which is a seasonal affair in the US and Australia. The Indian consumer has been the apple of every investor’s eye over the past couple of years. After all, the demographic dividend points towards consumption. Beauty products have been a growth segment for many FMCG groups in India. Google Trends offers some interesting aspects of the Indian consumer.

The Indian subcontinent is the only region searching for fairness cream.

Nokia and Airtel dominate the mobile space

Kotak Phone

Nokia has been a dominant player in the Indian space if search volumes are anything to go by. Samsung has risen strongly since CY2009 and has only recently managed to edge past Nokia, whose search volumes dropped since February 2012 This probably highlights the continued importance of the VFM category in this space with rural India making up a large portion of India’s population. While the scale, compared with Nokia, differs significantly, Indian mobile makers (Micromax and Karbonn) have seen increased online inquiries.

Gaming consoles: Microsoft’s Xbox and Sony PS3 too close to callKotak GamingSearch volumes for reputed gaming consoles in India. PS3 and Xbox are too close to call based on their search volumes. Delhi seems to be India’s gaming destination, topping the list for all three consoles.

Painting the Indian landscape: Asian Paints dwarfs the restKotak PaintAsian Paints dominates other paint brands in India. Search patterns for Asian Paints show consistent seasonality, peaking around October for most years. The bottoms are seen during July for most years. For the other brands, Berger dominates in Orissa and West Bengal, Nerolac gets the highest searches from Maharashtra and Dulux is prominent in
Haryana.

Cement: Google Trends tells the regional story

While the search volumes of different Indian cement makers do not help to deduce much, the regional focus of each company is apparent with regional search volume patterns. ACC receives pan-India queries, with Madhya Pradesh and Orissa heading the list. Shree Cement has Rajasthan as its Googler hub, Ambuja Cements gets the most searching from
West Bengal and India Cement seems to get its attention from Tamil Nadu.

Indian online shopping portals: Flipkart wins

Kotak Flipkart

Flipkart towers over the rest of the reputed online shopping portals in terms of search hits. EBay and OLX come a distant second as Exhibit 37 shows.

Hunt for visas drops: Good news for the Indian mother

Kotak Visa

Indian mothers with an empty-nest fear can heave a sigh of relief as the hunt for visas has fallen from the peak in CY2006. While UK and US visas are still top related key words in the category, both have seen substantial declines over the past five years.

Insurance: Searches for car insurance drops globallyKotak Insurance

Globally, car insurance is searched for more than life and health insurance. This is in contrast to the average India Googler who puts life insurance above the rest. Even in that, we have seen a substantial downtrend in the quantum of queries regarding life insurance since CY2010. Currently, ‘reliance life’ and ‘bajaj life insurance’ are some top searches in the category.

Web banking: ICICI Bank sees a proportional drop in searches

Kotak Bank

ICICI Bank, Axis Bank and HDFC Bank have the same amount of Googler interest. ICICI Bank has seen a proportional drop in searches since November 2010 and interest in Axis Bank has seen growing since CY2007. The top searches in the category tend to be login-related. Considering this, the proportional drop in searches for HDFC Bank and ICICI Bank could also be due to internet users discovering the bookmark functionality in their browsers.

Aadhar, India’s UID initiative picks up steamKotak Aadhaar

The Unique Identification Authority of India (UIDAI) deserves a pat on the back as online enquiries on Aadhar and UID have skyrocketed in recent months. Hyderabad, Vijayawada and Vishakhapatnam have generated the largest number of searches.

Google Correlate: A theory tested with flu and dengue

Google Correlate is Google’s online tool that enables researchers to model real-world behavior using search trends. Google applied this in the field of medicine to predict patterns of flu in the US (Google Flu Trends) and dengue (Google Dengue Trends) in developing nations like Brazil, India and Indonesia. For the Google Flu Trends, the result in the US were strongly related with data published by the Center of Disease Control and Prevention (CDC).

Scooter sales and IFSC

Kotak Scooter Corelate

Picture above shows a similar trajectory in total scooter sales in India and the online hunt for IFSC (Indian Financial System Code). IFSC is a unique alphanumeric code that identifies a bank-branch participating in two main electronic funds settlement systems in India (RTGS/NEFT). The correlation has an R2 of 0.98. Whether it is causal or coincidental, we cannot say.

Pati patni aur woh

Kotak Car Sales Corelate

Total car sales in India seem to have a lagged relationship with wedding-related activities. Exhibit 62 shows the strong correlation in the data series with key words related to horoscope matching and bridal shopping. ‘The man, wife and their ride’ could easily be the next auto campaign slogan.

Researching an IPO: Grey market prices and premiums take precedenceKotak IPO

The retail IPO investor seems to be a firm believer in the principles of efficient market hypothesis. Among other things, the theory claims that publicly available information is usually factored into the price. With search queries on grey market prices showing a strong correlation to the key word ‘IPO’, the Indian investor researching on an IPO opts to analyze grey market prices more regularly than the red-herring prospectus.