BackZerodha CEO shares account opening trend, gives reality check about broking biz
Zerodha's Nithin Kamath said, ‘Trading volumes and stockbroking are extremely high beta and can drop off just as quickly as they go up’
PremiumZerodha founder Nithin Kamath on Friday shared information regarding the new monthly users of the platform. Kamath shared a chart wherein he showed the Zerodha account opening trend and "midcap 100".
The Zerodha CEO said that the monthly account openings are back to March 2020 levels, and added, "The mean reversion in new accounts means revenues will also revert to the mean, but with a lag.
Trading volumes and stockbroking are extremely high beta and can drop off just as quickly as they go up".
Sharing data between January 2018 and January 2023, the chart reflected that monthly account users on the Zerodha platform has gone up when the Midcap 100 also climbed up. This trend was seen majorly when the market was bullish. With the entry of 2022, the monthly active users tailed off due to volatility in the market.
Kamath shared the reason why he shared the data. He said, "Sharing also because outside observers usually look at headline numbers of trading volumes and assume that broking is a huge opportunity with a large revenue pool that will grow forever.
In reality, it's a cyclical business that tends to revert to the mean," he added.
The number of Demat accounts rose to 11 crore in January this year--a surge of 31% on a yearly basis.
Also, the incremental additions of such accounts were higher in January than in the preceding four months. However, it was still below the financial year 2021-22 (FY22) average run-rate of 29 lakh.
The incremental additions of such accounts stood at 22 lakh last month, compared to 21 lakh in December, 18 lakh each in October and November and 20 lakh in September, according to an analysis by Motilal Oswal Financial Services.
As per the data, the number of demat accounts rose to 11 crore in January 2023 from 8.4 crore in January 2022, registering a growth of 31%.
Market experts believe that the addition in dematerialised (demat) accounts over the last one year was mainly due to attractive returns given by the equity markets and the ease of account opening process offered by brokers to their clients.
Also, increased financial literacy and the growing popularity of trading amongst youth have been some other major factors contributing to the rise, they added.
While the number of demat accounts continues to rise, the count of National Stock Exchange (NSE) active clients has been falling for seven consecutive months.
The number of active accounts at the NSE dropped 2.9% month-on-month to 3.4 crore in January, making it the seventh consecutive monthly decline. On a year-on-year basis, the number of such active users rose 2.7%.
The intensity of the fall was higher at 10.4 lakh accounts in January as compared to 7 lakh for the past three months.
At present, the top five discount brokers -- Zerodha, Angel One, Groww, ICICI Securities and IIFL Securities -- account for 59.2% of the overall NSE active clients.
(With PTI inputs)
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