Even as shares of listed brokerage firms continue to rally on expectations of sustained retail participation, Nithin Kamath says the underlying market data tells a far more complicated story. In a detailed post on Tuesday, the Zerodha founder said several headline indicators often associated with a bull market are not fully lining up, raising questions over whether India is actually in a broad-based equity boom or simply witnessing pockets of speculative activity.

“If you look at listed brokers, you’d probably think we are in a bull market, but the data shows something else,” Kamath wrote. According to him, cash market turnover is still below the peak levels seen in late 2024, suggesting that core delivery-based equity activity has not yet returned to previous highs despite the recovery in benchmark indices and strong momentum in broader market stocks.

Kamath also pointed to another unusual trend — net direct equity inflows have turned negative for the first time since FY19, indicating retail investors may be pulling back from directly buying stocks even as capital market-linked themes continue to attract attention.

Kamath believes one major driver is the continued surge in mutual fund participation. “Gross SIP flows are at a record Rs 32,000 crore,” he noted, referring to the steady stream of monthly investments into equity mutual funds that has become one of the biggest domestic support pillars for Indian equities.

For brokerage firms, however, this does not automatically translate into higher income. Kamath said most major brokers, including Zerodha, offer direct mutual funds where they earn little or no distribution commission.

“But the major brokers offer direct mutual funds, so they don’t make anything, including us,” he wrote.

Instead, he said, a large part of revenue growth across the broking industry may be coming from leveraged and speculative trading activity. Kamath highlighted the rapid growth of margin trading funding, or MTF, across the industry.Zerodha’s own MTF book has grown from zero to around Rs 7,000 crore in just 18 months, he said, showing that appetite for leveraged bets remains strong despite volatile markets.

He also flagged a sharp difference in client behaviour across platforms. According to Kamath, brokerage income as a ratio of client float for most listed brokers is around 40% or higher, while Zerodha’s ratio remains below 9%.

That gap, he suggested, may indicate that clients on some platforms are trading much more aggressively relative to the money parked in their accounts.

Kamath reiterated Zerodha’s long-held approach of not pushing users toward excessive activity. “Our philosophy has always been to not push or induce customers to trade. In trading, for most people, fewer trades are always better. That means leaving a lot of revenue on the table.”