Zerodha co-founder Nithin Kamath on Wednesday (March 26) highlighted a shift in India’s stock market dynamics in an interview with CNBC Awaaz. He noted that the past four to five years saw an accelerated market boom, compressing a decade’s worth of growth into a short period.
The COVID-19 era fueled this surge as investors actively sought opportunities, pushing retail participation to record highs.
Kamath explained that the bull run over the past few years drove rapid expansion in the market. What typically unfolds over 10-15 years happened in just 4-5 years.
This growth was fueled by increased investor interest during the pandemic. Now, participation is expanding across the country, but trading activity remains concentrated in certain cities.
Retail trading activity slows
Recent trends suggest that retail participation is moderating.
Kamath pointed out that since October 2023, Futures & Options (F&O) activity has declined, with both trading volumes and investor losses reducing.
In the cash market, delivery-based transactions have slowed for the past six months.
While retail investors played a key role in the last bull run, their future involvement will depend on market direction over the next six months.
Regulatory impact on brokers
Kamath acknowledged that regulatory changes, particularly in options trading, have hit the broking industry hard.
He said that Zerodha experienced a 30-35% impact due to these changes. As a regulated business, adapting to policy shifts remains a constant challenge, influencing revenue and market participation.
Listing plans
Kamath said that Zerodha does not require external funding. He emphasised that once a company grows, adapting becomes harder, and public market pressures can conflict with long-term vision.
Zerodha will only consider listing if mandated by regulators. Currently, it operates on a five-to-six-year strategic plan.
To reduce dependence on broking, Zerodha is expanding into NBFCs, insurance, and asset management.
Kamath believes that the previous financial year marked a peak for the industry. He expects broking firms to face revenue pressure as the market normalizes.