Zerodha founder Nithin Kamath has openly acknowledged the shrinking demat market share of India’s once-dominant discount broker, revealing how regulatory changes and increased competition are reshaping the brokerage landscape. Despite maintaining strong profitability, Zerodha faces its biggest challenges since inception.

The data reveals Zerodha’s changing market position amid broader industry turbulence:

Metric	Current Status	Impact
Market Position	2nd largest (down from #1)	Lost top spot to Groww
Active Users	7.96 million (16.25% share)	Lost 550,000 users in H1 2025
Revenue Drop	30%+ decline across brokers	First degrowth in 15 years
Regulatory Impact	30-50% revenue hit expected	Index derivatives regulations

Industry-Wide Challenges: Beyond Zerodha

Kamath highlighted that “across brokers, activity has dropped by more than 30%” and noted this marks “the first time in 15 years since we started that we are seeing degrowth in the business.” The decline affects all major players:

User Exodus: India’s top four brokerage firms lost nearly two million active investors in the first half of 2025, with Groww losing 600,000 users despite remaining the largest broker.

Regulatory Pressure: SEBI’s stricter F&O trading regulations have significantly impacted trading volumes, particularly affecting the derivatives segment that drives broker revenues.

Zerodha's Market Share Reality Check: From #1 to #2 as Founder Warns of Industry 'Perfect Storm'

How Zerodha is Adapting

Despite challenges, Zerodha remains financially robust with ₹4,700 crore profit in FY24 and customers holding over ₹5.66 trillion in demat accounts. The company’s strategic response includes:

Revenue Diversification: Reducing dependence on F&O trading revenue while strengthening equity delivery and mutual fund offerings.

Market Positioning: Kamath admitted he “wouldn’t start Zerodha in 2025” due to market saturation, focusing instead on strengthening existing services rather than expansion.

Technology Focus: Continuing investment in platform reliability and user experience improvements.

The Bigger Picture: STT Revenue Impact

Kamath warned that government STT collections could “fall to ~40,000 crore—significantly below the estimated ~80,000 crore” if trading volume declines continue, highlighting the broader economic implications of the brokerage industry’s struggles.

What This Means for Investors

The brokerage industry’s consolidation benefits serious investors through improved services and more sustainable business models. While trading volumes may decline, this could lead to more informed investment decisions and reduced speculative trading.

For Zerodha users, the company’s strong balance sheet and continued innovation suggest stability despite market share pressures in an increasingly competitive landscape.

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