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 fell sharply on Monday on concerns that the Reserve Bank of India’s (RBI’s) tighter rules on loans to proprietary traders and brokers could raise funding costs, cool leveraged trading, and force intermediaries to seek alternative borrowing sources. Market participants also said the framework favours banks while tightening the screws on brokers.

 

“We believe the new rules will allow banks to actively participate in corporate takeovers, mergers and acquisitions (M&As), leveraged buyouts, and similar transactions. However, for loans to capital market intermediaries (CMIs), the 100 per cent collateral requirement and a 40 per cent haircut on shares for collateral valuation could restrict access to bank funding and raise trading costs for brokers,” analysts at JM Financial Institutional Securities said in a note.

 

 

On the bourses, shares of BSE fell 9.8 per cent intraday, while Angel One slid 9.5 per cent. Multi Commodity Exchange of India (MCX), Nuvama Wealth Management, Groww, and 360 ONE WAM declined by as much as 7.4 per cent. At the close, only MCX ended in the green, up 0.4 per cent, while the rest settled lower in a range of 0.16 per cent to 7.4 per cent.

 

The Nifty Capital Markets index closed 1.36 per cent lower, even as the benchmark Nifty 50 gained 0.83 per cent.

 

Higher collateral, higher costs

 

Under the guidelines, effective April 1, the RBI has mandated that credit facilities to CMIs must be fully secured, with a minimum 40 per cent haircut on equity shares offered as collateral. Funding for margin trading facilities (MTFs) must be backed by at least 50 per cent cash collateral.

 

Analysts said the norms are less favourable for CMIs such as stockbrokers and clearing members. They warned that the 100 per cent collateral requirement could make bank funding unattractive, pushing brokers toward non-banking financial companies, the commercial paper market or non-convertible debentures.

 

“Brokers and professional clearing members are likely to tap alternative borrowing routes. Capital market entities and individuals may increasingly turn to non-traditional financing, paving the way for faster growth in structured products and lending opportunities for wealth managers, while also moderating trading activity in select cohorts,” Citi Group said in a note.

 

Jefferies flagged proprietary traders as the most exposed, citing higher cash collateral requirements and the recent hike in securities transaction tax. “We estimate the new RBI norms could affect 10–12 per cent of options turnover, translating into a roughly 10 per cent impact on BSE’s earnings,” it said.

 

Jefferies prefers ICICI Asset Management Company, Groww, KFin Technologies, and Computer Age Management Services, saying that asset managers and registrar and transfer agents face lower regulatory risk and stand to benefit from a structural shift in household savings.

 

While analysts expect limited impact on most retail brokers — many already meet collateral norms — those with sizeable 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 reassess funding for its MTF book of ₹6,100 crore; about 50 per cent of its March 2025 borrowings of ₹3,400 crore came from banks. “Groww will need to tap markets as its MTF book scales up aggressively, having quadrupled to ₹2,300 crore in the third quarter of 2025–26,” JM Financial said.

 

Banks emerge clear beneficiaries

 

In contrast, the Nifty Bank index rose 1.27 per cent after the proposed guidelines allowed banks to finance up to 75 per cent of the acquisition value in eligible takeover transactions, subject to conditions. For unlisted companies, an investment-grade credit rating is mandatory, while post-acquisition consolidated debt-to-equity must not exceed 3:1.

 

JM Financial said these guardrails enable banks to meaningfully expand their role in M&As, leveraged buyouts, and structured acquisition financing, while containing systemic risk. Overall capital market exposure has been capped at 40 per cent of a bank’s capital base, with acquisition finance limited to 20 per cent within that.

 

Banks will also be permitted to lend to individuals against listed shares, mutual funds, exchange-traded funds, real estate investment trusts, infrastructure investment trusts, and rated debt securities within prescribed loan-to-value limits.

 

Financing for initial public offerings, follow-on public offerings, and employee stock option or ownership plans of up to ₹25 lakh per individual will be allowed, subject to a 25 per cent margin contribution. Analysts said this could support liquidity in primary and secondary markets while benefiting banks’ fee income and secured lending.