Archive · 27 Aug 2026
Nithin Kamath Warns Zerodha’s Margin Funding Business Is Risky
Zerodha lets some customers borrow money to buy investments through a service called margin funding.
Its customers have borrowed Rs 6,000 crore using this service.
Nithin Kamath, Zerodha’s co-founder, says this can be dangerous if markets suddenly fall.
Borrowing can make losses spread more quickly across the market.
The service brings Zerodha interest income and now makes up 10 per cent of its revenue.
However, Kamath says it is not suitable for most customers.
He believes brokers should explain the risks instead of encouraging people to borrow.
He also said Indian markets have been mostly flat for two years, while some overseas markets have risen.
Despite slower account growth, India’s IPO market remains very active.
Zerodha’s margin funding book is worth Rs 9,000 crore, with clients borrowing Rs 6,000 crore.
Nithin Kamath said client borrowing equals 25 per cent of Zerodha’s net worth and could amplify contagion risks.
Zerodha launched margin trading funding in December 2024, and it now contributes 10 per cent of revenue.
Kamath said new-account growth and market activity have slowed as Indian equities entered a sideways phase.
He attributed market pressure to weak domestic performance, Middle East-related energy risks, rupee weakness and foreign outflows.
- Who
- Nithin Kamath, Zerodha’s co-founder, and Zerodha’s clients and competitors.
- What
- Kamath warned about risks from Zerodha’s margin funding business and discussed slower market and account growth.
- When
- Zerodha began its margin funding business in December 2024; Kamath also discussed market conditions over the past two years.
- Where
- India’s financial and stock markets.
- Why
- Kamath said high leverage could worsen a market contagion, while weak Indian market performance, energy concerns, rupee pressure and foreign investor outflows have slowed activity.
Risk Concerns
Business And Market Opportunities
Margin funding
Risk Concerns
Kamath said margin funding is scary because leverage could pull Zerodha down during a market contagion, and he said the product is unsuitable for most customers.
Business And Market Opportunities
The business provides Zerodha with more predictable interest income and currently contributes 10 per cent of its revenue.
Customer growth
Risk Concerns
Slower markets have reduced the pace of new-account additions and overall activity at Zerodha.
Business And Market Opportunities
Some competitors continue adding customers, particularly in North and East India, while Zerodha retains a 15.2 per cent active-client market share.
Indian market outlook
Risk Concerns
Kamath said the Nifty 500 has gone nowhere in two years and cited energy pressures, rupee weakness and foreign investor outflows as additional problems.
Business And Market Opportunities
Kamath said there is still a strong bull market in India’s IPO space, with new issues appearing daily.
- Margin funding book
- Rs 9,000 crore at Zerodha
- Client borrowing
- Rs 6,000 crore
- Borrowing relative to net worth
- Client borrowing equals 25 per cent of Zerodha’s net worth
- Revenue contribution
- Margin funding accounts for 10 per cent of Zerodha’s revenue
- Business launch
- Zerodha started margin funding in December 2024
- Active-client market share
- Zerodha had 15.2 per cent of the market at the latest count
- Assets under management
- Kamath said Zerodha is India’s largest by AUM, consisting of retail and high-net-worth individual holdings