Billionaire Nithin Kamath, founder of India’s second-largest stock broker Zerodha Broking Ltd., warned that the surge in his company’s margin-loan business may pose a risk if markets fall sharply even as the activity boosts revenue. While we are okay, we might get pulled down if there were market contagion due to this leverage, Kamath told clients Wednesday in an annual letter, adding that interest earned on leverage extended to clients accounts for 10% of revenue. MTF is scary! The caution comes amid growing leverage in Indian retail investing, where Zerodha has become a dominant platform for low-cost trading.

Kamath emphasized that while current profitability is strong, systemic risks from elevated leverage could amplify losses during downturns. His remarks highlight a tension between revenue growth and financial stability in India’s rapidly expanding brokerage sector. The warning reflects broader concerns about retail investor exposure to margin products amid volatile global markets.