Stock brokerage firm Zerodha’s new account openings every month are back to the March 2020 levels, its Founder Nithin Kamath said in a post on social media platform Twitter. On Friday, Kamath tweeted, “Our 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.” He also wrote, “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.”
Data shared by the entrepreneur and investor revealed that the simple moving average of monthly accounts opened in January 2023 and the months after that dropped below 20,000. A similar number was witnessed in March 2020. This number reached its peak in January 2022 when the number of new accounts opened went a little above 30,000. In an interview with Business Today in February, Kamath’s brother and Zerodha’s co-founder Nikhil Kamath hinted at a slowdown when he said that the account opening activity has reduced in the stock market. In a conversation with Udayan Mukherjee, Global Business Editor of Business Today, he said, “If account opening activity or traction in the market is a leading indicator, a lot of people have slowed down. Also, many people have incorrectly set expectations for themselves with respect to what has happened in the last couple of years.” He also said that in the last couple of years, retail investors have seen obscene returns. The standard returns in the stock market are around 11 per cent per annum, he said. “I hope the retail investors adjust their goal post to this 11 per cent.”
Nikhil said that retail investors should not expect the returns of the past to get replicated in the future.
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