Zerodha Demat account opening trend giving a reality check about the markets!

Zerodha founder Nithin Kamath recently tweeted a chart showing a significant drop in new account openings on the platform and compared this trend with the movement in 'midcap 100' index.

Kamath said that Zerodha's monthly 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," he added.

On the reason why he shared this data, Kamath 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."

As per a report, the number of Demat accounts stood at around 11 crore in January 2023, showing a rise over 30 percent on a yearly basis.

Demat account additions last month were to the tune of 2.1 million. The net additions remained steady for the past three months. The average additions per month in FY22 were 2.9 million. In February 2023, the number of active users on NSE declined for the eighth consecutive month to 33.6 million.

“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.