Zerodha's new Demat account opening back to March 2020 levels: Nithin Kamath

India's largest stock broker Zerodha's co-founder and CEO Nithin Kamath today said its monthly new account openings are back to March 2020 levels.

"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," Kamath tweeted.

The reason is 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, the billionaire startup founder said.

Market data shows that Zerodha reported a 1% month-on-month decline in its client count to 6.4 million but its market share rose 22 basis points to 19.2%.

"Total active user clients at NSE rose 2.7% YoY but fell 2.1% MoM to 33.6m. This was the eighth consecutive month of a sequential decline. The intensity of the fall was lower at 0.7m accounts in Feb ’23 v/s 1m in Jan ’23," according to a recent report by Motilal Oswal.

Currently, the top five discount brokers account for 59.6% of overall NSE active clients, an increase from 59.2% in Jan’23.

Demat account additions last month stood at 2.1 million, which has been steady for the past three months but lower than the average of 2.9 million in FY22. The number of active users on NSE declined for the eighth consecutive month to 33.6 million last month from 34.3 million in January.

“The number of total demat accounts rose to 113 million in Feb’23. Incremental account additions stood at 2.1 million in Feb’23 v/s 2.2m in Jan’23. Although account additions were steady, the number continued to be below the FY22 average run rate of 2.9 million,” Motilal said.

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