Zerodha, the Bengaluru-based online discount brokerage, has become a household name in India’s retail investing landscape. Founded in 2010, it disrupted traditional brokers with its low-cost model and technology-first approach. But recent regulatory-headwinds and business-model shifts have introduced new challenges. This article provides a detailed look at Zerodha’s history, impact, current status, and what its evolution means for Indian investors and the broader capital-markets ecosystem.
Origins and growth
Zerodha was founded on 15 August 2010 by brothers Nithin Kamath and Nikhil Kamath. The name “Zerodha” is a portmanteau of “Zero” and the Sanskrit word “rodha” meaning barrier — reflecting the founders’ ambition to remove barriers for retail investors.
From its early days, Zerodha positioned itself as a discount broker: low cost, technology driven, and with minimal marketing spend.
By 2019 the firm had emerged as India’s largest retail brokerage by active clients.
Key milestones include:
- Full self-funded, boot-strapped model (no external venture funding).
- Building proprietary trading and investing platforms (Kite, Coin) and strong focus on customer education via its “Varsity” initiative.
- As of 2025, Zerodha claims to hold roughly 11 % of all retail and HNI holdings in India in its demat accounts.
Business model and significance
Zerodha’s model can be summarised as: low cost + technology + education. A few hallmarks:
- It disrupted full-service brokers by offering flat or zero brokerage on delivery trades (for many years) and very low charges for derivatives/trading.
- It invested in building its own infrastructure, emphasising customer trust, minimal intrusive app permissions, and transparency.
- Beyond brokerage, Zerodha has also built an ecosystem: its Rainmatter fund/incubator invests in fintech startups; its platforms (trading, investing, funds) aim to serve all retail investor needs.
Why it matters: For millions of retail investors in India, Zerodha lowered the cost of access to markets, made investing more accessible, and helped drive growth in trading volumes and participation. It also spurred competitive pressure across the broking industry, leading to more digital platforms and lower fees overall.
Recent developments and challenges
Despite its strong past growth, Zerodha now faces a number of key headwinds.
Regulatory and revenue pressure
In October 2025, Zerodha’s CEO Nithin Kamath warned that the company may begin charging for equity delivery trades — a service long offered free — because of a steep 40 % drop in brokerage revenue in Q2 FY2025 compared with the same quarter in the prior year.
The drop stems from regulatory changes impacting the derivatives (F&O) segment, which has been a major revenue driver: higher securities transaction tax (STT) on options, fewer weekly contract expiries, and removal of some exchange rebates.
These pressures indicate that the industry-wide model of relying heavily on high-frequency trading and derivatives may no longer be universally tenable for brokers.
Business model pivot and future outlook
Zerodha itself has acknowledged the need to “pivot” its business to remain sustainable under changed regulatory and market conditions.
For example:
- The company has launched a mutual fund business (Zerodha Fund House) and recently floated a BSE Sensex tracking index fund.
- It is emphasising long-term investing, education and infrastructure as opposed to purely high-volume trading.
- It is publicly stating its intention to remain debt-free, privately held, and transparent in operations.
Impact on Indian investors and markets
Zerodha’s evolution affects Indian participants in several ways:
- Cost of investing: If Zerodha alters its zero-brokerage delivery model, many retail investors may face higher costs or shift trading/investing behaviour.
- Access and participation: Zerodha’s initial disruption helped bring many new users into the markets; any slowdown or model change may affect entry-level investor behaviour.
- Education and infrastructure: Zerodha’s push on investor education (Varsity) and its platform innovations contribute to better-informed retail participants; that remains a positive for market depth and maturity.
- Industry dynamics: As one of the market leaders, Zerodha’s responses to regulatory and revenue stresses serve as a bellwether for the broader discount broking sector in India.
- Market structure: A shift away from trade-volume-driven models may encourage brokers to develop revenue streams around advisory, mutual funds, passive investing, technology services — which could impact how retail investing evolves in India.
What Indian investors should keep in mind
- Review your brokerage costs and understand any upcoming changes to fee/commission structures with Zerodha or other platforms.
- If you are a frequent trader (derivatives, intraday), be aware of how regulatory changes may affect the cost and viability of your strategy.
- For long-term investors, platforms like Zerodha have increasingly pushed low-cost investing, mutual funds and index funds — consider aligning with those models of investing rather than purely active trading.
- Keep updated on broker disclosures and regulatory developments (for example changes in STT, derivatives contract structure) — these can indirectly affect the brokers you use and the charges you pay.
- Monitor the reliability and infrastructure of your broker: platforms embedded in major volumes have incentives to maintain uptime, clarity and regulatory compliance.
Looking ahead: what to watch
Key signals for Zerodha’s future and broader retail broking in India include:
- Whether Zerodha formally announces charges for equity delivery trades and how large those are.
- Its growth trajectory in mutual funds, passive investing, and how much revenue shifts from derivatives to other services.
- How regulatory initiatives (e.g., changes in derivatives contract structure, STT changes, KYC/onboarding rules) evolve and affect broker economics.
- Whether Zerodha’s technology infrastructure and customer-trust positioning enable it to maintain or grow market share even under pricing pressure.
- How rival brokers respond — whether they follow Zerodha’s pivot, or differentiate via services/advisory/investing vs. trading.
Zerodha has been a transformative force in India’s capital markets — lowering the cost of entry, enabling retail participation and driving digital brokerage innovation. However, the industry’s regulatory environment and revenue model are shifting, and Zerodha is at a critical inflection point. For Indian investors, brokers and market watchers alike, the coming 12-24 months will reveal how the discount broking model adapts and whether the gains in access, cost-efficiency and investor education are entrenched or need re-imagining.\
Also read:India Post: Pioneering Digital Transformation and Financial Inclusion in 2025
Last Updated on: Tuesday, October 21, 2025 4:49 pm by Sakethyadav | Published by: Sakethyadav on Tuesday, October 21, 2025 4:49 pm | News Categories: News