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We are still in long-term bull trend in India: Nikhil Kamath, Zerodha

ET Now|
Updated: Jan 11, 2019, 03.40 PM IST
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nikhilkamath
India as a market is only beginning to mature now, says Kamath.

Highlights

  • Broking in its entirety is still at a very nascent stage in India.
  • Transparency and technology together is what we hope will help us compete going forward.
  • We are yet to see how this industry will develop and what it will transform into.
For Nikhil Kamath, co-founder, Zerodha, the markets will get a lot bigger than they are right now. And retail participation is only going to increase, he told ETNow.

Edited excerpts:


Prima facie, give us how the trends have been. You are India’s biggest broker coming through online. What is your assessment after the recent volatility in the market?

On an overall basis, the markets have shown a larger uptrend over the last few years. We see an increasing participation in the retail market overall and this trend has not changed for many years now.

Just wanted to understand how exactly businesses have been shaping up. Will you break it up into what the nitty gritties are like? What is the kind of total number of clients you are sitting on right now? What is daily and annual turnover you have been clocking, given that it has been a trying and testing 2018 the markets have seen?

In terms of the number of clients, we measure clients by active clients, people who have traded in the last three months. We are at about 8.5 lakh active clients right now and most of our turnover comes from the derivative segment, which is about a couple billion dollars right now per day.

Overall, when you look at 2018 yes, it was volatile, but I do not think it has seen enough of a correction to warrant the kind of pessimism which associates with the market right now. It is a small correction and it is par for the course and we are still in larger term bull trend in India.

Looking at your numbers, your annual turnover is about Rs 800 crore, daily turnover is $2 billion and active clients about 8.5 lakhs. Could you highlight what is the scope and scale? Where do you want to go from here?

India as a market is only beginning to mature now. With the number of people having access to the capital markets and having some kind of exposure to stock markets, overall the only way to grow is to grow from here. The markets will become a lot larger than they are right now and we see the pace at which new people enter the market. We hope that this will incrementally increase over the next couple of years.

You would also appreciate that this space is also getting extremely competitive. There are other large players as well which are vying for a piece of the pie. What would you say is Zerodha’s edge and what is it that makes you the number one or the largest broker in the country right now?

The first thing and the thing that we have had from the very beginning is we are extremely transparent. We do not have anything like hidden charges or we are not as complicated a ecosystem as some of our competitors. That has worked well for us.

The other big thing for us is technology. In terms of all the tools a trader might have to access to trade better in the market or invest or enter a mutual fund or whatever it might be, I think in terms of technology we are right up there and we are always the first ones to innovate and bring new things into the market.

So, transparency and technology together is what we hope will help us compete going forward.

But it is a highly competitive market you would agree and a growing one, everybody wants a piece of the pie, how would you sustain?

Set on these two principles, we hope to grow organically with time. If you have a great product and spend a significant amount on innovation and building new kinds of technology, more people will come to us than they have up until now.

Tell us a little bit more about the kind of innovations you are undertaking at Zerodha? What are the new product offerings you are looking at to increase and make your platform more sophisticated?

We are starting off with a bond platform. I mean until now, retail participants in India have not had any real easy way to access the bond platform. We are building something around that and we are trying to make the mutual fund piece wherein retail clients can enter a mutual fund more easily and efficiently.

We have a whole host of smaller innovations that are in the pipeline like just in terms of your trading experience, the quality of back office you get, the intelligence you are going to have around the trades you have executed on your platform. A whole bunch of small things we hope with time will add up to provide a much better customer experience to the end user.

You have went past many others to become the number one broking firm. That is very encouraging to see in a short span of time. But do you think that long-term broking as a business can be as profitable? Is it more about top line, cash flows than bottom line?

I think all of the above. Broking in its entirety is still at a very nascent stage in India. We are yet to see how this industry will develop and what it will transform into, but with penetrations being as low as they are right now in India, the pie will grow bigger for all the competitors who are vying for any kind of control over the space, any kind of equity in the space.
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