Amid stock market slump, founder Nithin Kamath warns of trading volume decline

In February, the Indian stock market experienced a significant downturn, with the benchmark Sensex tumbling more than 4,000 points—a sharp decline of 5% for the month. This decline resulted in an incredible Rs 40 lakh crore being lost from the market capitalization of companies listed on the BSE. Nithin Kamath, a founder and CEO, highlighted a significant slowdown and expressed his worries regarding the steep drop in trading activity.

Zerodha’s Nithin Kamath on worst market crash since 1996; ‘First time in 15 years we are seeing degrowth’

The Nifty 50 also faced challenges, enduring its fifth consecutive monthly decline, which represents its longest losing streak since it was established in 1996. Sharing his thoughts on X Kamath remarked, "I've no idea where the markets go from here, but I can tell you about the broking industry. We are seeing a massive drop in terms of both the number of traders and volumes. Across brokers, there’s more than a 30% drop in activity,” he wrote.

Kamath noted a 30% drop in trading activity on brokerage platforms, referencing data from the National Stock Exchange (NSE). He emphasized that the declining trading volumes reflect the Indian stock market's limited depth, predominantly involving only 1 to 2 crore traders. Kamath also pointed out that if this trend persists, the government's income from Securities Transaction Tax (STT) could shrink to below Rs 40,000 crore in FY 2025-26.

"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. By the way, if this continues, the government will not make even Rs 40000 cr from STT in FY 25/26, at least 50% below the Rs 80,000 cr estimate,” he wrote.