The Indian stock market witnessed a sharp correction last week, with the Sensex plunging 1,414 points and the Nifty slipping below 22,150, wiping out nearly Rs 9 lakh crore in market value. Amid this turmoil, Nithin Kamath, founder and CEO of Zerodha, shared his insights on the state of the market and its implications for traders and the broking industry.
In a post on X , Kamath remarked:
"I’ve no idea where the markets go from here, but I can tell you about the broking industry. We are seeing a massive drop in terms of both the number of traders and volumes."
He highlighted that trading activity across brokerages has declined by over 30%, marking the first business slowdown for Zerodha in its 15-year history. This downturn reflects the shallow nature of Indian stock markets, with active participation limited to just 1-2 crore investors.
Kamath also warned that if the market correction persists, it could significantly impact government revenues. He estimated that collections from the Securities Transaction Tax (STT) could drop by 50%, falling to Rs 40,000 crore in FY 2025-26 from an expected Rs 80,000 crore. The decline in trading volumes and reduced market participation are key factors behind this potential revenue shortfall.
Kamath’s observations shed light on the limited depth of Indian equity markets. Despite years of growth, retail participation remains concentrated among a small segment of investors. This lack of diversity in market participants makes Indian markets more vulnerable to sharp corrections.
As volatility grips global and domestic markets, Kamath advises traders to stay cautious. While he refrains from predicting market movements, his insights underscore the need for structural reforms to deepen India’s equity markets and reduce their vulnerability to external shocks.
