Zerodha sees new client sign-up numbers increase exponentially in 2021

KR Srivats New Delhi | Updated on February 05, 2021

Nikhil Kamath, Co-founder and CIO, Zerodha

A reduction in STT in the Budget could have helped more traders become profitable, says co-founder Nikhil Kamath

It’s not just the stock market indices that did well in the year 2020, the online brokerage industry too saw huge addition to clientele as lakhs of new investors signed in to share trading platforms during the Covid-19-induced lockdown last year.

BusinessLine interacted with Nikhil Kamath, Co-founder and CIO, Zerodha, a unicorn and the country’s largest retail trading platform. He has also built two properties — True Beacon, an alternative investment fund for HNIs and UHNIs globally, and Rainmatter, a venture capital firm focused on the fintech space. Excerpts:

How has Budget FY2021-22 impacted the online broking industry and the economy?

The Budget has had no real impact on the brokerage industry.

What is the outlook of the industry post Budget FY2021-22?

The industry continues to grow with higher participation, albeit on a low base of 2 per cent participation. We expect this number to go up by 50 per cent over the next 12 months. The industry was expecting a reduction in Securities Transaction Tax (STT), which did not happen. A reduction in STT can significantly reduce the impact and help more traders become profitable. STT is many times what a client may even pay as brokerage.

Also read: Zerodha commits $100 million fund towards initiative to combat climate change

How many new to market customers have Zerodha onboarded in the 2020 calendar year?

About 2 million.

What is the aspiration for 2021?

To continue signing up people at the same pace and encourage increased participation from first-time investors.

What is the current customer base? How has it grown in recent years?

The customer base is 4.3 million. It has increased between 50 and 70 per cent per year consistently.

Do you think this frenzy over new sign-ins to equity trading is a bubble that will burst this year?

With less than 5 per cent of the country having direct or indirect access to financial markets, we think the number of sign-ups will increase exponentially. A favourable tax rate and a downward interest rate cycle should help bring a larger audience to the public markets.

What are strategies that Zerodha is planning to undertake to retain its leadership position?

We endeavour to evolve and change frequently and to bring innovative new products to help investors stay profitable. This, coupled with the highest in industry transparency, we hope, will help us retain our leadership position.

What is the average daily volume put through Zerodha in the cash market? How has this average grown in recent years?

The average daily volume number has grown in line with the number of new investors and is increasing by over 50 per cent every year.

How is the play on the F&O side?

Investors are getting more sophisticated in the F&O space; the number of users using F&O to mitigate risk and enter sophisticated strategies is increasing.

Also read: Zerodha makes easy gifting securities

Where do you see the next round of growth for Zerodha coming from?

As the population is getting savvy, a larger audience is looking to diversify into equity to take advantage of this investment class’s liquid nature. We see people who typically have too much asset allocation to real estate and bank fixed deposits diversifying into the public equity category. This number will continue to grow as the rate of change of inflation is set to rise again.

Where is Zerodha getting the maximum response for new sign-ins — from which cities?

Bangalore, Mumbai, Delhi, and Hyderabad.

Published on February 05, 2021

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