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Nithin Kamath, CEO of Zerodha, believed that actions against influencers who make false claims should be carried out through a regulatory framework. During a discussion on Zerodha’s podcast, Nithin emphasised that they cannot independently take a stance against such influencers, given the considerable influence wielded by them in the present era.
“As a broker, we can’t take a unilateral stance in this matter because financial influencers, or ‘finfluencers,’ now hold substantial power. Taking a stance on our own could potentially have adverse consequences for our business. Therefore, any necessary actions should be channelled through a regulatory framework. I believe that the consultation paper in question is a step in the right direction as it addresses these issues,” stated Kamath.
He also elaborated on how the consultation paper aims to eliminate some of the incentives for influencers that may lead to conflicts of interest. Kamath went on to discuss the concern that influencers are setting unrealistic expectations for novice investors regarding the stock market.
“While there are influencers who are providing educational content, the more significant issue is that they are also fostering unrealistic expectations about the ease of making money in the market. When someone sets such misguided expectations, it ultimately harms the industry in the long term. Although we may see short-term gains in terms of increased account openings, this applies not just to Zerodha but to the entire broking community. When people enter the stock market with unrealistic expectations, they are likely to be disappointed and may not remain invested for the long term,” Kamath noted.
He stressed the importance of attracting investors for the long term to promote the growth of India’s capital market. Kamath pointed out that despite India’s large population, market participation has been relatively shallow. As of July, the total number of Demat accounts in the country reached 12.35 crore.
Kamath also highlighted the role played by influencers in driving greater retail participation in the stock market, particularly following the COVID-19 pandemic.
“The substantial growth in capital market participation over the last two to three years may not have occurred without many individuals actively discussing it on social media platforms. I believe that what might have otherwise taken five to six years has been compressed into the last two to three years,” Kamath added.
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