Zerodha founder gets asked this question frequently these days. His reply
Zerodha's Nithin Kamath tweeted that he is often asked how will the broking industry perform in the next few years
How will the broking industry perform next few years? This is a question Zerodha's co-founder and Chief Executive Officer (CEO) Nithin Kamath gets asked often, more recently. As new investors turn up to participate in the Indian stock markets and that leading to the rise in demat account openings, broking companies' stocks have been rallying since the past few sessions on improved business and industry outlook.
Kamath said that the user growth depends on whether the markets (Nifty) go up or not. He said that it took more than 10 years to reach the high made in 2008 in terms of new user addition (total NSDL + CDSL Demat). Thus, revenues are based on market volatility and the more the market moves, the higher the revenues generated, he explained.
Central Depository Services Limited (CDSL) recently became the first depository to open more than four crore active Demat accounts. CDSL and National Securities Depository Limited (NSDL) are the two depositories in India. Shares of CDSL, the only listed depository in the country, have rallied over 250% in a year and over 60% alone this month. Domestic brokerage firm Angel Broking's shares have also been gaining momentum as the company witnessed its highest gross client addition in the first quarter.
New demat account additions rose to an all-time high of 10.7 million between April 2020 and January 2021 amid the pandemic. Also, the capital markets witnessed an unprecedented monthly addition of 2.4 million new retail investors over the past four months.
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