Margin trading facility books shrink again as risk appetite cools

Margin trading facility books declined for second straight month in March as heightened volatility and global uncertainties led investors to cut leveraged exposure despite steady cash market activity

Margin trading facility (MTF) books declined again in March, extending the downtrend for a second month as heightened market volatility and cautious investor sentiment dampened appetite for leveraged positions.

 

The MTF book fell over 8 per cent month-on-month (M-o-M) in March to ₹1.06 trillion, following a nearly 2 per cent decline in February, even as trading activity remained uneven across segments, according to data from stock exchanges.

 

The latest drop comes against the backdrop of an 11 per cent slump in stock markets, as a flare-up in geopolitical tensions and a surge in oil prices rattled investors.

 

Market participants said the moderation in margin books reflects a subtle shift in risk appetite, with traders either trimming leveraged bets or avoiding fresh exposure amid uncertain conditions.

 

 

The decline in MTF books came even as cash market turnover held up. In March, average daily cash turnover rose 9 per cent M-o-M to ₹1.34 trillion.

 

MTF allows investors to pay only a portion of the trade value upfront, with brokers funding the rest at an interest cost.

 

While the past few months have seen moderation, the MTF book has grown sharply year-on-year — from ₹68,000 crore in March 2025 to ₹1.05 trillion in March 2026 — indicating continued retail participation.

 

Some industry leaders have flagged risks associated with rising leverage.

 

“Going forward, steady investor participation and the gradual absorption of regulatory changes are expected to support stable growth in the MTF segment and overall market turnover. However, geopolitical tensions in West Asia remain a key risk factor. A sustained rise in crude oil prices could increase market volatility and affect investor sentiment, potentially leading to a more cautious approach towards leveraged positions and trading activity,” CareEdge Ratings said in its recent report on MTF.

 

The report added that while the Reserve Bank of India 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 average daily turnover.

 

Despite the recent moderation, brokers maintain that structural demand for MTF remains intact. The facility has seen wider adoption, especially among discount brokers such as Zerodha, Groww, and Paytm Money, which introduced MTF offerings in recent years to diversify revenue streams amid pressure on derivatives income.

 

The outstanding MTF book has also stayed above the ₹1 trillion mark since first crossing the milestone in October 2025, underscoring its growing role in market participation.

 

In March, the advance/decline ratio slipped to 0.77, its lowest level since February 2025 and close to the trough of 0.72 seen in March 2020.

 

In January, Zerodha founder Nithin Kamath cautioned that in a sharp market downturn, leveraged positions could trigger “synchronised liquidations”, exacerbating volatility, particularly in less liquid stocks.