However, recent market fluctuations have raised concerns about the role of MTF in driving stock movements.
Is MTF driving market declines?
The overall MTF book in the market currently stands at around ₹78,000 crore, a figure that has remained relatively stable, according to Shripal Shah, MD and CEO of Kotak Securities.
He believes linking recent market declines directly to MTF movements may not be accurate.
Historically, the MTF book was around ₹85,000 crore in September-October 2024. Since then, it has declined by 9–10% to ₹78,000 crore, aligning with the 10–12% drop in the Nifty over the same period.
This suggests that MTF movements are more reflective of broader market trends rather than a primary driver of market corrections.
NSE data from February 2025 supports this observation. On February 7, MTF stood at ₹78,099 crore. It dropped to ₹67,756 crore by February 10 but rebounded to ₹78,235 crore on February 11, indicating fluctuations in leveraged market positions rather than a sustained decline.
The role of margin calls in stock volatility
Dhiraj Relli, MD and CEO of HDFC Securities, also downplays the impact of MTF on the broader market. While margin calls can influence individual stock prices, they do not significantly impact overall market trends.
The MTF book peaked at around ₹83,700 crore in September 2024 but has since dropped by about 20% to ₹67,700 crore as of February 10, 2025. This decline has contributed to price drops in certain stocks, particularly in the mid and small-cap segments, which have been heavily bought by high-net-worth individuals (HNIs).
Despite industry warnings about high valuations, HNIs have continued to invest in midcaps, leading to sharper corrections in these stocks.
Impact on retail and HNI investors
On average, NSE 500 stocks have dropped about 31% from their peak prices, significantly impacting retail and HNI investors. Those using leverage through MTF face even greater losses due to the added burden of interest payments on margin calls.
While margin trading can enhance gains during market upswings, it also amplifies risks during downturns. Investors should exercise caution and assess their risk appetite before opting for leveraged trading.
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