Intellectually Indians are still not ready to handle volatility of the stock markets. The right step is to probably introduce people to debt before you introduce them to equity, says Nithin Kamath, Founder & CEO.
Has the initial rush of retail investors continued?
Surprisingly, it has continued so we have been adding more than 200,000 new customers every month. April was the largest but in August again we have done more than 200,000. The market is tempered now. It has stopped running up as much as it did in June and July. Surprisingly, even now there is so much interest for doing this but yes pleasantly surprised.
In terms of the top cities I notice that Pune is the most active and 40% comes from other top metros such as Bengaluru, Chennai. How active are people in Bangalore?
Bangalore, Pune, Hyderabad are our target audience because the average age of the customer is less than 30 today and these are typically people who have started jobs and have started saving and they are now thinking about what is the best way to save, invest right and this audience cares for product experience for education initiatives.
One of the heartening things about this generation of people investing in the market is that they do not really rely on tips as much as the previous generation did. I have been in the market for the last 20-25 years and I can see that shift in the behaviour of users. Instead of just taking a stock tip from someone, today people want to know why I will be buying this. There is a little more interest in that. So, that is the audience for us in these three cities.
Bangalore is where I was brought up and we started our business here. Bangalore probably has one of the best audiences. What is surprising is Pune is a little higher than Bangalore but one of the issues with this data point is that a lot of times, customers have their address in some city but they actually move around.
And when you say the audience in Bangalore is very different do you mean they are more discerning?
They appreciate product experience a lot more. If you were to compare a Bangalore audience to say a Mumbai or a Delhi audience, the behaviour is slightly different. The Bangalore audience cares a lot more about product experience. This is probably because Bangalore has a lower average age. Historically, the stock market has to fight gold and real estate which have been favourites of Indians for a long time. Surprisingly, we have seen in the last few months that even though gold prices have shored up, people are not really going out and buying gold jewellery.
We have seen a surge in the activity of people buying gold ETFs and people investing into sovereign gold bonds. Probably sovereign gold bonds are one of the best ways to invest into gold today because you get that 2.5% over and above whatever gold returns you get. So, there has been a surge in activity around gold in an electronic form.
This year marks Zerodha’s 10th anniversary. What is going to be your focus over the next 10 years?
We enjoy what we are doing right now which is the stock market. This is our core competency and this is an industry that we understand well. So, whatever we do, will probably be ancillary to this. One of the things we have working on currently has been loans against securities. The customers who hold stocks, can borrow money instead and at much lower interest rates because there is collateral. This is a securitised loan so yes so whatever we do in the future we will be around capital markets. We will be around helping people find better alternatives to fixed deposits. Intellectually Indians are still not ready to handle volatility of the stock markets. The right step is to probably introduce people to debt before you introduce them to equity.
When I say the right strategy, I am talking about expanding the markets. As of today, the big challenge for broking industry is that there are probably 80 to 90 lakh Indians who invest in the market directly once a year and they are probably 1.5 crore in number and they do it through mutual funds. The market size is very shallow and I think fixed income is probably a better bet than equities.