Why did BSE, Angel One, MCX shares fall up to 10% after RBI funding norms?

BSE, Angel One and MCX shares fell up to 10% after RBI revised capital market exposure norms. JM Financial says new rules favour banks but tighten funding for brokers

Why are BSE, Angel One, MCX shares falling today?

  Impact on RBI norms on capital market funding on brokers: Capital market stocks were reeling under heavy selling pressure on Monday, February 16, as analysts cautioned that the Reserve Bank of India's tighter rules on loans to proprietary traders and brokers will raise their costs, likely cooling leveraged trading and forcing them to look for new sources to borrow money.

 

Analysts at JM Financial Institutional Securities believe that the norms, which have been proposed to reshape how banks fund acquisitions, stock market activity, and brokerage operations, favour banks while tightening the screws on brokers.

 

"We believe the new rules will allow banks to actively participate in corporate takeovers, M&A, leverage buyouts, etc... However, for loans to capital market intermediaries (CMIs), 100 per cent collateral requirement for funding and 40 per cent haircut on shares for collateral value calculations may reduce bank funding access and result in high trading cost for brokers," it said in a report.

 

On the bourses, BSE share price tanked 9.8 per cent intraday to a low of ₹2,726.3 per share, while Angel One shares plunged 9.5 per cent to ₹2,441. MCX shares crashed 7.4 per cent, Nuvama Wealth Management 4.9 per cent, Groww 4.8 per cent, 360One WAM 2.9 per cent, and UTI AMC 1.4 per cent.

 

At the index level, the Nifty Capital Markets Index fell 4.3 per cent intraday, and was down 2.4 per cent at 9:42 AM. By comparison, the Nifty50 index was quoting 0.05 per cent higher at that time.

 

What are the RBI norms on CME, REIT funding?

On February 13, 2026, the RBI's issued guidelines on capital market exposure and REIT financing. Analysts, however, said the norms, effective from April 1, 2026, are less favourable for capital market intermediaries (CMIs) such as stockbrokers and clearing members.  The RBI has mandated that credit facilities to CMIs must be fully secured, with a minimum 40 per cent haircut on equity shares used as collateral. Funding for margin trading facilities (MTF) must carry at least 50 per cent cash collateral.

 

Analysts cautioned that the 100 per cent collateral requirement could make bank funding less attractive for brokers, pushing them toward non-bank finance companies (NBFCs), commercial paper (CP) markets or non-convertible debentures (NCDs).

 

"Brokers and professional clearing members may likely tap into other routes for borrowing purposes. Capital market entities or individuals may tap into non-traditional financing route, paving the way for faster growth in structured products or lending avenues for wealth managers and likelihood of moderation in overall trading activity in select cohorts," noted those at Citi Group.   Jefferies, too, said proprietary traders will be the most affected as costs could increase on higher cash collaterals and the recent STT increase, while retail brokers should see limited impact given they already meet collateral requirements.  "We estimate new RBI norms could affect 10-12 per cent of options turnover, resulting in a ~10 per cent earnings impact for BSE," it said. The brokerage prefers ICICI AMC, Groww, Kfin Technologies, and Computer Age Management as "AMCs and RTAs carry lower regulatory risks and benefit from a structural shift in household savings".

 

Meanwhile, analysts said retail-focused players with sizeable margin trading facility (MTF) exposure may need to diversify funding sources as the new framework raises capital efficiency thresholds.

 

Among retail brokers, JM Financial expects Angel One to immediately relook at its funding for its MTF book (₹6,100 crore; 50 per cent of its March, 2025 borrowings of ₹3,400 crore came from banks).  "Groww will need to come to markets as its MTF book scales up aggressively (given MTF book soared 4x to ₹2,300 crore in Q3FY26)," JM Financial noted. 

Capital market norms favour banks

That said, the proposed guidelines permit banks to finance up to 75 per cent of acquisition value in eligible takeover transactions, provided the acquiring company has a minimum net worth of ₹500 crore and has reported profits for the past three consecutive years.

 

For unlisted firms, an investment-grade rating is mandatory. Post-acquisition, the consolidated debt-to-equity ratio must not breach 3:1.

 

JM Financial believes these guardrails allow banks to meaningfully expand their presence in mergers and acquisitions (M&A), leveraged buyouts and structured acquisition financing, while containing systemic risk. By imposing exposure ceilings -- total capital market exposure capped at 40 per cent of a bank's capital base and acquisition finance limited to 20 per cent within that -- the RBI has ensured participation without excessive balance sheet stress.

 

The move opens a relatively high-yielding corporate credit opportunity for banks. The structured nature of acquisition finance, combined with valuation safeguards and mandatory equity contribution from acquirers, provides comfort on asset quality, JM Financial Securities noted.

 

That apart, banks are now allowed to lend to individuals against listed shares, mutual funds, ETFs, REITs, InvITs and rated debt securities within defined loan-to-value (LTV) thresholds.

 

IPO, FPO and ESOP financing up to ₹25 lakh per individual is also permitted, subject to a 25 per cent margin contribution. This could improve liquidity flows into primary and secondary markets, indirectly benefiting banks through fee income and secured lending growth, analysts said.

 

Separately, the RBI's draft norms on lending to Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) further channel bank credit toward stable, income-generating assets.