Why Zerodha Co-founder Nithin Kamath is pessimistic about valuations of brokerages around world?

Zerodha co-founder and chief executive officer Nithin Kamath recently said that he is pessimistic about the valuations of brokerages around the world. Kamath took to Twitter to express his disappointment concerning brokerages. Zerodha CEO's apprehension roots in a report on stock breokerage Robinhood (RH) by JP Morgan, which claimed the app downloads are down by 78% on QOQ basis. He was surprised that the report comes at a time when it is still a bull market.  

"I am pessimistic about the valuations of brokerages around the world, including that of Zerodha. This is because the performance of broking is directly tied to market performance. If people aren’t making money or there is no greed, activity usually drops off a cliff," he tweeted on October 1.  

He went on to say that the best tech, products and low pricing won't help if people are not making money or there is no greed.  

He was surprised by fact that downloads were down despite being a bull market. "A new report from JP Morgan on Robinhood (RH) said that app downloads are down by 78% QOQ and active users by 40% QOQ. And this is still a bull market, just that market has plateaued last few months," he posted.  

For Robinhood, unlike Indian brokerages, Crypto is the wild card, he said. If not the stock price would've collapsed on this data, he further said.  

He also expressed surprise at the brokerages relying on retail customers to grow and assuming that the recent growth rates will sustain forever.  "I don’t understand other sectors as well. But when brokerages globally, relying on retail customers to grow are getting crazy valuations on the assumption that the recent growth rates will sustain forever, I constantly ask myself, WTH is the world smoking," he added.