Nithin Kamath, CEO of Zerodha, has warned that a severe stock market crash could drive investors away for years, as happened following the 2008 financial crisis.

He posted on X. "By the way, if markets fall sharply, investors might stay out of the market for years—just like they did after 2008."

India's net mutual fund investments dropped precipitously between 2008 and 2014, according to Kamath's data, as Indian investors grew cautious and stayed away from stocks for a long time.

He now worries that if the current market volatility develops into a full-fledged crash, history will repeat itself.

What Happened in 2008?

Back in 2008, the global market was greatly impacted by the failure of Lehman Brothers, a multinational financial services company and one of the biggest investment banks in the US.

This caused a global ripple effect. The Indian stock market was not spared. The Sensex fell more than 60%, from 21,206 in January 2008 to 8,160 by October of that year. Market recovery required time, government support, and global efforts.

Retail investors are active since COVID

He also wrote, "One of the strange things about the last five or so years is that retail investors have consistently been net buyers of equities. It remains to be seen whether they will continue to buy the dip.

In the last five years, retail investors have demonstrated a strong interest in the stock market. Despite global risks and ups and downs, many continued to invest, particularly during market downturns and global headwinds.

LATEST MARKET MOVEMENT AFFECTED BY TRUMP TARIFFS

Trump's retaliatory tariffs and concerns about a global trade war are causing volatility in the Indian stock market at the moment of Nithin Kamath's warning.

One of the worst trading days in the past ten months occurred on Monday, when the NSE Nifty50 fell 742.85 points and the S&P BSE Sensex closed 2226.79 points lower at 73,137.90.

Nevertheless, both indices opened higher the next day, with the Sensex and Nifty rising by almost 1.5% in early trading, mostly due to indications of a global market recovery. Because the situation is still unclear, experts have advised against becoming overly excited.