Startup Sunday Season 1 Episode 9 (Zerodha)

“There is only one side to the stock market and it is not the Bull side or the Bear side, but the right side” – Jesse Lauriston Livermore

zerodha

Trading in derivatives is the most rewarding and also the most punishing business where person investing 1 Lakh INR in the morning encashing 3 lakh INR in the evening is quite common. At the same time another person, perhaps his neighbor, invests 1 lakh INR and loses the whole amount in the same day. As we all know, even the most experienced traders lose huge money in the market, be it derivatives or equities. Even people like Warren Buffet are not an exception when it comes to losing huge money. A few days back (14th September, 2016) Warren Buffet lost $1.4 billion in a single day as Wells Fargo stocks fell 3.3% that day. If you think this article is about a business entity or a person who managed to create an application that accurately predicts the stock market and removes the plight of bad trades, it is not. This is about a person who thought “out of the box” and established a discount brokerage firm which bought him two Audi cars, a black one and a golden one, in a short span of time. Mr.Nitin Kamath is that person and Zerodha is that company. It is a Bengaluru based financial services company.

Mr.Kamath started his trading episode at the age of 17 after being inspired by his Marwari friends. He was a regular visitor to “Bucket Shops” where stock market betting takes place. He completed his engineering graduation in 2001. Having moved by the idea of making huge money in stock markets, Kamath installed internet in his home and started trading in indices. When he felt everything was in place, the Dotcom burst occurred and took away all the savings that his father had saved over the past four years. In order to earn money, Kamath joined a call center so that he can use the day time to trade. He worked there for 3.5 years. Those were the days when Kamath used to sleep only on weekends.

Determination would never land anyone in the wrong place. This happened in Kamath’s life when his “Gym Buddy”, who was a US return, was so inspired by his track record that he gave him a cheque of 25 lakhs INR during their first drink!! As soon as he got the money, he quit his job at the call center and started his venture – Kamath Associates which would trade on its client’s behalf. Kamath Associates slowly picked up its customer base through word-of- mouth. The firm got associated with Reliance Money as a sub-broker. Soon Kamath’s turnover became the highest among all the other sub-brokers. In May 2009, Kamath made a decision to exit all current positions ahead of the election results. He regards this move as the dumbest move in his life.Because the market reacted positively and jumped 40% in the next four days. That is when he decided to quit trading on behalf of his clients and start his own Online Broking Firm.

Zerodha’s uniqueness lies in its online service model. The commissions are not based on the number of lots that a trader buys instead it is based on the number of trades. For example, if a trader wants to buy 1000 lots of Nifty futures and his broker charges him 20/lot, he will have to shell out 20000 INR as brokerage commission. In the case of Zerodha, the same transaction would cost just 40 INR. (20 INR for buying and 20 INR for selling) The trader saves 19960 INR. Mr.Kamath was referred as one among the 10 businessmen to watch out for in 2016 by the Economic Times. Zerodha strives hard to bring the latest technology and services for its customers. It launched Pi trader in 2015 which is a desktop trading application which can be used for trading, charting, scripting and analysis. Pi is perceived as one among the best trading software as it is more stable and user-friendly. Zerodha makes a turnover of about 10000 Crore INR on a daily basis. It is one among the top volume contributors to NSE, BSE, MCX-SX and MCX. It is perceived as one among the best discount broking firm in India.

In order to boost efficient trading techniques, Zerodha offers a 60 day challenge to traders in which the profits of all the traders are taken into consideration and the winners list is posted on the website. The brokerage commission that the trader paid for the 60 day period will be reimbursed to him/her. Brokerage on equities (delivery) is zero.

As of January 2016, Zerodha has around 1.5 lakh active traders and holds 5% of the overall retail trading share across BSE,NSE and MCX. Zerodha was awarded with “Startup of the Year (Bootstrap) 2016”by Economic Times. It was also the winner of “BSE/D&B Emerging Brokerage Award” for two consecutive years, 2015 and 2016.

“The Bull will be there; The Bear will be there;Make sure you manage to stay there”

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