A sustained bout of market volatility is beginning to dent leveraged participation, with India’s margin trading facility (MTF) book declining for the second consecutive month in March.
The MTF book fell 5.6 per cent month-on-month to a total average of ₹1.13 lakh crore in March, following a marginal 0.5 per cent decline in February and a 3 per cent rise in January, according to CareEdge.
“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,” the report said.
Year-on-year growth remains strong
Despite the sequential decline, the MTF book remained on a strong footing on an annual basis, growing 57.1 per cent year-on-year in March to ₹1.13 lakh crore, reflecting sustained retail participation and continued interest in leveraged equity exposure.
The National Stock Exchange of India (NSE) continued to dominate the segment, accounting for over 95 per cent of total MTF volumes. Its MTF book stood at ₹1.09 lakh crore in March, up 58.6 per cent year-on-year, though it saw a sequential dip.
In comparison, BSE Limited reported a smaller MTF book, which grew 23.7 per cent annually but declined marginally month on month.
Market activity stays robust
Overall market activity remained robust despite the dip in leveraged activity. Average daily turnover (ADTO) across equity and derivatives rose 46.5 per cent year-on-year to ₹517.7 lakh crore in March.
Sequentially, ADTO also increased, driven by year-end trading activity such as portfolio rebalancing, tax-related trades and derivatives expiry-led rollover and unwinding of positions.
Cash market turnover, too, improved, rising 28.9 per cent year-on-year, supported by steady retail participation and spillover from derivatives activity.
Caution amid rising costs and global risks
While investor participation remains steady, rising transaction costs following the increase in securities transaction tax (STT) and global uncertainties could weigh on trading activity going forward, the rating agency said.
“Geopolitical tensions… and a sustained rise in crude oil prices could increase market volatility and affect investor sentiment, potentially leading to a more cautious approach toward leveraged positions,” it said.