Zerodha CEO Nithin Kamath finds a silver lining for D-Street investors in global meltdown

New Delhi: Amid bloodbath on Dalal Street on the back of twin global headwinds of high inflation and increasing interest rates, Zerodha CEO Nithin Kamath today said that the current global meltdown has a silver lining for India as we may continue to do better than other markets on a relative basis because of the low levels of leverage in our capital markets.

Describing leverage as a weapon of mass destruction (WMD), which results in excess both on the way up and down, Kamath said leverage in times like these usually accentuates the fall. “When markets fall, long leveraged positions are required to bring additional margins, failing which positions are forced to exit resulting in the markets falling even more,” Kamath said on Twitter.

“Thanks to regulatory changes, leverage offered by brokers is now restricted only to margin funding and at very low levels,” he said. Adding that higher margin requirements across the board have also reduced the risk and even loans against securities offered by NBFCs/banks are at historically low levels, he further added.



Even in F&O, he said that most businesses have moved to options, which while being risky for a trader doesn't bring in as much risk of forced liquidations to the overall markets as futures.

However, Kamath further said that it is impossible to figure out the leverage FIIs have outside India that may lead to liquidations here.

Today’s selloff made Indian equity investors poorer by Rs 6 lakh crore as headline index Nifty50 plunged to the lowest since May 19 to close below 15,800 levels.

The broader market also mirrored the benchmark with Nifty Mid and smallcap indices down by 3-4 per cent each. Reflecting uncertainty in the minds of traders and investors, fear gauge index India VIX jumped 14 per cent to 22.37 levels.

IT stocks were among the worst hit as the Indian rupee hit a record low of 78.28 amid volatile crude oil prices.

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