Zerodha wants to model itself on Vanguard

Nithin Kamath of Zerodha has expressed his intent to align Zerodha along the lines of index fund giant, Vanguard. He wants to orient Zerodha on the lines of a passive mutual fund. 

 

He outlines a few advantages of passive MFs over their active counterparts. Firstly, passive MFs do not require the running of large teams and chief investment officers which significantly reduces costs to run an AMC. Leveraging technology also becomes easier and cuts down operation and compliance risk. But most importantly, while it is true that anyone can launch a passive MF today, the moat will be the principles on which the AMC is run. 

For fiscal year FY22, Zerodha had reported revenues of Rs4,963 crore and net profits of Rs2,094 crore. However, Nithin Kamath has repeatedly cautioned about the cyclical nature of the stock market business. Investors tend to follow a herd mentality, with everyone flocking into equities when the going gets good, but ahead of any difficult period, investors desert the market.
 

Lastly, he also presents his sentiments on where Indian markets are heading. Identifying himself as a bear, he strongly necessitates the importance of never going against the trend and trust your instinct that the market will continue to empower itself. Developing markets like India will continue to remain strong with a 60% confidence interval.

 

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