Liquidity, uncertainty hit MTF book growth in March, says report

The margin trading facility (MTF) book in March saw a decline, even as overall activity remained robust, according to a report by CareEdge Ratings. As per the report, the total MTF book stood at ₹1.13 trillion, down 5.6 per cent from the preceding month. This marked the second consecutive monthly decline, reflecting cautious investor sentiment amid volatility triggered by geopolitical uncertainties.

 

However, on an annual basis, the report said that the MTF book grew by 57.1 per cent.

 

"The moderation likely reflects weaker market conditions, elevated volatility, and geopolitical uncertainties, which led to a more cautious approach and some pullback in leveraged positions," CareEdge Ratings said.

 

 

In contrast, the average daily turnover (ADTO) in March across derivatives and equity increased by 46.5 per cent Y-o-Y basis to ₹517.7 trillion. The rise was mainly driven by strong activity in the derivatives segment, with volatility further increasing participation.

 

On a sequential basis too, ADTO rose, supported by financial year-end trades, portfolio rebalancing, and tax-related activity.

 

The cash market ADTO also saw improvement, with turnover surging nearly 29 per cent on a Y-o-Y basis, boosted by steady retail participation and spillover from derivatives trading.

 

The report highlighted that the National Stock Exchange of India (NSE) continued to dominate the MTF space, accounting for over 95 per cent of total volumes. Its March MTF book rose by 58.6 per cent Y-o-Y to ₹1.09 trillion. However, it declined marginally on a Q-o-Q basis.

 

In comparison, BSE Ltd's MTF book grew by 23.7 per cent Y-o-Y and declined by a tad sequentially.

 

According to CareEdge Ratings, the data indicate a cautious but active market where investors are becoming more selective in taking leveraged positions amid uncertainty.

 

The report said that the recent increase in Securities Transaction Tax (STT) could weigh on turnover in FY27. Additionally, the implementation of RBI’s regulatory amendments, now deferred to July 2026, could have implications for trading volumes (after implementation).

 

CareEdge Ratings expects steady investor participation going ahead and gradual absorption of regulatory changes to support stable growth in both MTF and overall market turnover.

 

However, the West Asia conflict remains a key risk factor, it said, adding that a sustained rise in crude oil prices could further heighten volatility and affect investor sentiment, leading to a more cautious approach towards trades.

 

"While the RBI continues to maintain comfortable system liquidity, ongoing global uncertainties may result in intermittent volatility, which could moderate the pace of growth in both MTF exposures and overall ADTO," CareEdge Ratings said.