'If you are Swiggy or Zomato...': Nithin Kamath says broking fragility isn’t hype, it’s a red flag

When a journalist teased Nithin Kamath for his “disarming candour” and hinted he might be trying to scare off competitors, the Zerodha co-founder replied with trademark clarity: “There is enough and more competition—I put it out as a caution to investors.”

Kamath was responding to a comment on his recent LinkedIn post, where he laid bare the structural fragility in India’s booming brokerage business. Drawing a sharp analogy, Kamath said, “If you are Swiggy or Zomato and were relying on only two restaurants for 80% of the revenue, that is a risk everyone should know about.”

His warning stemmed from a stark industry truth: more than 80% of Zerodha’s revenue—and that of most Indian brokers—now comes from just two derivatives contracts, Nifty and Sensex futures and options. “That means one change can wipe out a big chunk of our revenues,” Kamath noted in his original post.

Despite the glittering growth of retail trading in India, Kamath argues the brokerage business is far from a gold mine. He recalled being told in 2008 by a private equity investor that a broking firm was too dependent on a handful of clients—a risk that persists today, just in a new form.

Kamath also pointed out that unlike U.S. platforms like Robinhood, Indian brokers can’t rely on “payment for order flow” revenue. Compounding the challenge is a regulatory rule that forces brokers to return all client funds every quarter, which Kamath likened to a “forced bank run.”

While the sector continues to draw interest from investors, Kamath’s transparency sheds light on its hidden vulnerabilities. As he put it: “I wonder why the brokerage business looks so sexy from the outside.”