'If this continues...': Zerodha's Nithin Kamath sounds alarm amid deepening market crisis

Amid market turmoil, Zerodha co-founder Nithin Kamath has flagged the impact on the broking industry. “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,” Kamath wrote on X.

The downturn has led to more than a 30% drop in trading activity across brokers, marking the first instance of degrowth in the industry in 15 years. 

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“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,” he added.

Kamath also pointed out the potential impact on government revenue, warning that if the trend continues, Securities Transaction Tax (STT) collections for FY 25/26 could fall to ₹40,000 crore—50% below the estimated ₹80,000 crore.

The market downturn has led to a significant contraction in trading volumes:

• Options trading: The average daily turnover is ₹47,897.3 crore in 2025, down 46% from its all-time high (ATH). Retail turnover has declined 41%.
• Equity trading: The average daily turnover stands at ₹88,408.6 crore, down 42% from ATH, with retail turnover also down 41%.

The slump underscores the Indian market’s reliance on a limited number of traders, raising concerns about its depth and resilience.

February has been a brutal month for Indian equities, with the Sensex closing 4,000 points lower, marking a 5% monthly loss. The total market capitalization of BSE-listed companies has eroded by ₹40 lakh crore in just one month. The Nifty recorded its longest losing streak since inception in 1996, falling for the fifth consecutive month.

Since peaking in late September, the Nifty and Sensex have fallen by 15% each, with broader indices witnessing even sharper declines:

• Nifty Next 50: Down 26% from its peak.
• Nifty Midcap 150: Down 21%.
• Small-cap and micro-cap segments: Down 26-27%.

The sell-off has been fueled by foreign institutional investor (FII) outflows, with net sales of $12.2 billion in 2025 following $12.3 billion in Q4 2024. Geopolitical tensions and trade concerns have further dampened sentiment. “The spate of tariff announcements by Trump has been impacting markets... The latest announcement of an additional 10% tariff on China confirms that he will use the initial months of his presidency to negotiate a settlement favorable to the US,” said Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.