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A matador in the ring. With bulls and bears.

Nithin Kamath, Zerodha founder, speaks at Next Big What

The trading floor that gave way to terminals was a hypercompetitive arena. There was no quarter given, only taken. Billions are wiped out when a tsunami of stocks move in the opposite direction of bets. We’ve seen the pictures after a major stock market crash. People with ashen faces, eyes wide open looking at dropping share values. Or heads buried in hands. The cliches piled up. Rampaging bulls were the metaphor for a market stampede, defining the daily adrenalin rush and the stress. And why are bears the metaphor for a crash?

Here’s a plausible explanation from ‘Investopedia‘: 

  1. The terms “bear” and “bull” are thought to derive from the way in which each animal attacks its opponents. That is, a bull will thrust its horns up into the air, while a bear will swipe down. These actions were then related metaphorically to the movement of a market: if the trend was up, it was considered a bull market; if the trend was down, it was a bear market.
  2. Historically, the middlemen in the sale of bearskins would sell skins they had yet to receive. As such, they would speculate on the future purchase price of these skins from the trappers, hoping they would drop. The trappers would profit from a spread—the difference between the cost price and the selling price. These middlemen became known as “bears,” short for bearskin jobbers, and the term stuck for describing a downturn in the market. Conversely, because bears and bulls were widely considered to be opposites due to the once-popular blood sport of bull-and-bear fights, the term bull stands as the opposite of bears.

“I started trading to make quick money”

The old broking terminal interface
Photo by Austin Distel on Unsplash


Nithin Kamath, the founder of Zerodha, started trading when he was 17 because he had a bunch of Marwari friends and learned the ropes when he was still a teenager. So, while he continued with a course in engineering, he didn’t stop trading. He had a ringside view to the introduction of derivatives in the Indian market around 2001-02 and, as he puts it, “…was a product with which you could make unlimited profits and unlimited losses” Sure enough, whatever he managed to make, he lost, in his first experience with trading in derivatives.

He joined a call center, so he could trade during the day and work nights and did this for around 3-4 years to earn back the capital he had lost.  His first signup happened when an acquaintance at the gym he worked out took a look at the trades he was making and asked him to take over his account. That was the signal to quit the call centre job – he had landed his first client! One client led to 10 and before he knew it, he was logging in and out of client accounts to make trades, which was tiresome. So, he became a sub-broker for Reliance Money – essentially a franchisee and he did this, for the next three years, until 2009

Taking on the entrenched stockbrokers

Picture of Dalal Street, India’s stock exchange By BSEINDIA

India has a very small base of active stock market traders – 30 lakh or 3 million people out of a population of 1.3 billion. 99% are into futures and options or intraday trading. Just 1% of the market is people who buy equities in the hope that it will go up in the future and they can make a profitable exit. So, the game is essentially speculation. 

From day trader to entrepreneur

Having made a decent profit by 2008, Nithin Kamath had acquired a decade of experience in trading. Malcolm Gladwell’s famous theory of the Outliers (people who did the same thing day after day for around 10,000 hours probably had a much better chance to succeed) kicked in and he went from being a trader to entrepreneur. He saw his opportunity in the reluctance of traditional brokerages to go online – they had an online presence but even as late as 2010 operated in the old school fashion, holding cards very close to their chest, not being open with clients and maintaining the ‘percentage’ business model of revenue for every trade executed. He started off with a flat rate of Rs.20 ($0.28) and set the cat among the pigeons.

25 signed forms to open an account

Account opening forms to be physically signed
Photo by Cytonn Photography on Unsplash

The sheer number of forms that a potential client had to sign to open an account was painful. Getting interested people through the paperwork was itself a daunting task until the identity verification and online settlements were modified a few years later. But in 2009, the CEO was running around to get clients enrolled physically and there was no way around it – even if the technology was available. And because they were bootstrapped, there was no pressure to reach specific revenue or recruitment targets. In spite of all the obstacles, the company managed to turn a profit in the very first year – living up to its unusual name (Zerodha combines Zero and Rodha, or obstacle in Sanskrit to mean the company that overcomes obstacles)

Technology is the secret sauce

How Zerodha recast the broking template with open source software

Until Zerodha built its own trading platform from FOSS (Free Open Source Software), it looked pretty much like most broking terminals looked back in the early 90s – black screens with green lines. The brokers operating on it were familiar with it and clients did not ask for anything more. So things continued until the interloper walked in and took away business from right under their noses. There is a moment in Kailash Nadh’s (the CTO) presentation where he shows the stark difference between the old terminal and the new interface that Zerodha built. There is simply no comparison. It looks clean, simple to understand at a single glance but not very different from the other mobile interfaces that people are used to these days

Maintaining the edge.

The CTO of Zerodha, on the technology that powers the platform

Business never stays still – and while Zerodha got a headstart, it did not have to wait long for competitors to come along. And this is where the ability of the CEO to see the next viable opportunity becomes important. Nithin Kamath had built a formidable following by using his blog to write about the company and its plans. That would prove invaluable when a competitor who simply mimicked the interface and the costs came along.

He talks about how he still spends time commenting and answering questions on the properties the company has created  – Varsity and Trading Q&A, one of the most active communities that provide the company with constant feedback. He expanded to enable customers to invest in equities at zero cost – which would hopefully funnel into trades later. In addition, he expanded the company portfolio to include the purchase of direct mutual funds, so that people who were comfortable doing their own wealth management gained as much as 1-2% per year since they did not have to share it with their portfolio managers.

Zerodha is now the Number 1 broking company in India with the largest client base – and they have a lock-in on everyone who is even remotely interested in investments

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Or this: Mumbai Aura

Author short bio: I head Ideascape, an agency that I started over 14 years ago. I have over 35 years of experience in building brands in businesses as different as fairness creams, cycles, HR services, hospitals, hospitality and project management.

We’re a boutique creative agency but we provide the full range of branding services in partnership with several associates in digital marketing, web development, and event management. This blog is a collection of my experiences and my point of view on marketing and advertising


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