The Indian share market has been an unprecedented upturn, especially a big beneficiary of the brokerage industry. Nonetheless, Nithin Kamath, Zerodha's co-founder, and the man behind the rise of the largest retail broker in India, is of a different opinion, "Speaking on the Sun TV Program, he said that the industry may have already seen its peak and is now in a decline, especially 2024 being the 'glory days'."

Why the Change in Sentiment?

It is clear that Nithin Kamath's stand is more inclined to a low-pitched and possibly "stormy" 2025 in the brokerage world.

A range of reasons support his forecast, such as:

The major role played by the government in regulating the market: The main factor remains the new set of standards laid out by the Securities and Exchange Board of India (SEBI) that have been aimed towards Futures and Options (F&O) section whose goal is to curb speculative behavior.

Special and important news contained in the new regulations are:

The change of the weekly index options expiry date. New stock index options contracts will be introduced whose lot sizes will be larger (effective Jan 2025). The option buyers will have to make payments of premiums in advance and the opposite of this is not plausible (effective Feb 2025).

·       Limits on the expiration of weekly index options contracts.

·       Enhanced lot sizes for the future market options contracts (valid from January 2025).

·       A requirement of an upfront payment of the option premium for the option buyers (to be effective from February 2025).

·       As of the date of expiration of the calendar spread, the margin advantages will no longer be in use.

Stricter net open interest position limits

  • Trading Volumes: The shifts in regulations have an immediate impact. Kamath and Zerodha state that there was a clear 20-30% drop in all trades, F&O, across all platforms when regulations started to roll out. They predict that this trend may stay constant or go further down as the rules fully kick in.
  • Market Activity is Boring: According to Kamath, not only F&O but also the stock segment shows signs of coolness. At present, the trading turnover has come down to almost the same volume, as reported by Kamath, who also said that the market might be flirting with the idea of being back to normal since it was operating at pre-pandemic levels. He also mentioned that "the craziness may be ending."
  • Saturation of the Market: Kamath is of the view that the discount broking space is already very crowded and competitive. He says that without a more realistic and stronger selling point, he would not consider starting a similar project today if it was purely based on price.

Implications for the Industry

Nithin Kamath's outlook plays a prominent role to the Indian brokerage industry's development. Zerodha is now facing the possibility of hard times due to the factors such as the alteration of rules by the regulatory department and the change of the 2025 market outlook.

If we can assert that the company is already at a presentable stage, the growth limit will be redefined and we will be able to talk of a more dedicated and possibly rugged market. It is extremely important for those investors, traders and industry observers who really want to know the rules, the SEBI F&O regulations, if they are going to execute their activities a little.

In the next year, the authority of the SEBI F&O guidelines will decide the market shape and the money-making opportunities that will be available to the participants through the regulatory authority.

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