Amid a sharp correction in Indian equity markets, Zerodha is seeing a “massive drop” in the number of traders and trading volumes on its platform. This has led to a degrowth in its business for the first time since its inception, the company’s chief executive officer Nithin Kamath said on a social media post.
“We are seeing a massive drop in terms of both the number of traders and volumes. Across brokers, there’s a more than 30% drop in activity. Combined with the true-to-market circular, we are seeing degrowth in the business for the first time since we started 15 years ago,” he said on a LinkedIn post. Zerodha is the second-largest stock broker in the country, in terms of number of active investors, following Groww.
The drop in trading volumes is attributed to the ongoing market correction. Following a peak in September, indices have been on a downturn since October, as sell-off continued amid geopolitical uncertainties. This month, Sensex fell 5.55%, while Nifty is down 5.89%, marking the steepest fall in the last four months. In today’s session, Sensex and Nifty closed 1.9% lower at 73198.10 and 22124.70, respectively.
Small and mid cap stocks have borne the brunt of the downturn so far. In February, BSE Midcap fell 10.45%, while BSE Smallcap is down 13.76%“This drying up of volumes shows how shallow the Indian markets still are. The activity is more or less among those 1-2 crore Indians,” Kamanth noted in his post. If the sell-off continues, Kamath expects the government to not even make half of its targeted securities transaction tax (STT) for FY26, which is `78,000 crore.
“If this continues, the government will not make even `40000 cr from STT in FY 25/26, at least 50% below the `80,000 cr estimate,” he said.
STT is a direct tax levied on all trades of securities, such as stocks, mutual funds, and derivatives, on recognized stock exchanges. In the latest union budget, the government has revised the STT estimate for the ongoing financial year to `55,000 crore from `37,000 crore, out of which it has already collected `42,000 crore. This is higher than the `33,778 crore collected in FY24.
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