Nithin Kamath explains why Zerodha chose CDSL over NSDL

Zerodha CEO and co-founder Nithin Kamath on Thursday took to social media platform "X" to explain the rationale behind the discount broker's decision to partner with Central Depository Services Ltd (CDSL) instead of the National Securities Depository Ltd (NSDL) when Zerodha began its operations as a depository participant in 2016.


Kamath revealed that Zerodha’s decision was significantly influenced by CDSL’s local presence in Bengaluru, where the company is headquartered. The Zerodha CEO said that at the time, Harisha, a representative of CDSL, played a key role in facilitating the partnership.


“We started our business as a depository participant in 2016, and we had to choose between NSDL & CDSL. We only went ahead with CDSL because they had a local representative, Harisha, in Bengaluru,” Kamath said in a post on X, formerly known as Twitter.

Kamath explained that while Zerodha had the option to choose NSDL, the presence of a local point of contact with CDSL made the process smoother and more efficient. This, in turn, helped Zerodha establish a strong foundation in the Indian stock broking industry.

“After that, pretty much all the other new brokers also chose CDSL. Of course, this only worked because CDSL ensured that their tech could handle the scale of all this new business,” Kamath added.

In recent years, CDSL has seen substantial growth in its market share, partly driven by the boom in retail investing and the entry of technology-driven brokerage firms like Zerodha. CDSL, which is partly owned by the BSE, is listed on the NSE and the stock has witnessed 78.67% returns over the past one year.

Earlier in this week, the Zerodha CEO said on X, formerly known as Twitter, that Ahmedabad and Mumbai account for 80% of India's equity delivery trades, emphasizing the significant role played by Gujarat-based investors in the equity market. Kamath pointed out that despite Gujarat accounting for only 8% of total registered investors, the state’s influence on equity trading remains unparalleled.


Kamath's tweet, accompanied by charts detailing the state-wise and city-wise distribution of investors and trading turnover, underscored an imbalance in participation and turnover. While Gujarat’s share of total registered investors has been declining over the years—from 13% in FY10 to 9% in FY25 —Ahmedabad and Mumbai continue to dominate in equity delivery trades. In comparison, Maharashtra's share of registered investors stands at a stable 17%.

The charts in Kamath's tweet also revealed that Mumbai alone contributed a staggering 64.3% to NSE’s cash segment turnover in November 2024, further cementing its position as the financial hub of the country. Ahmedabad followed with a 17.5% contribution to NSE’s cash turnover during the month, a significant figure given its smaller investor base.

The data reflected the concentration of "real money" in equity delivery trades within these financial centers, Kamath remarked. He referred to Gujarat’s prowess in trading as a testament to its established entrepreneurial and investing culture.

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