The margin trading facility (MTF) book has seen a sharp decline of ₹15,000 crore since January 1, dropping from ₹86,500 crore to ₹71,500 crore, according to former banker and Marigold Wealth CEO Arvind Datta. The leverage contraction, he says, indicates that traders who are unable to make money are settling their losses and moving away from borrowing.
"MTF book has shrunk by 15K crores since Jan 1st from 86500 Cr to 71500 Cr. It's down 5K crores in last one week. It's a good sign leverage has declined," Datta wrote on X. "This has to decrease further in coming months as traders who won't make money will settle and not pay interest on the borrowing."
In a follow-up, he provided historical context, noting that the MTF book was just ₹7,100 crore in February 2020 and had surged to ₹25,700 crore by March 2023. "Went up 12X from 2020 as people could make easy money by availing margin funding. All that is over for now, till next bull cycle," he wrote.
Datta's comments come amid growing caution from market veterans. Ace investor Shankar Sharma recently warned that Nifty 50 may deliver zero returns from its September 2024 highs for the next four to five years.
Speaking at the Moneycontrol Global Wealth Summit 2025, Sharma remarked, "The bull market is in the fifth year. Indian market has a shelf life of five years. If the bull has run very fast, like in case of our small-caps, that bull is a tired bull which falls at the slightest of trouble."
Sharma, who had been bullish for nearly five years, hinted at a prolonged period of stagnation. "I am hoping for a bull market in 2030," he added.
The stock market is witnessing significant corrections as the leverage-driven rally fades. Both Sensex and Nifty closed lower in a volatile session on Monday, with the Sensex falling 217.41 points, or 0.29%, to settle at 74,115.17, while Nifty declined by 92.20 points to close at 22,460.30.
Vinod Nair, Head of Research at Geojit Financial Services, cited global factors for the volatility. "Global headwinds continue to drag the market sentiment, with the rise in US unemployment rates and tariffs leading to uncertainty, indicating that volatility is here to stay for the near term," he said.
Meanwhile, Foreign Institutional Investors (FIIs) offloaded equities worth ₹2,035.10 crore, while Domestic Institutional Investors (DIIs) countered with net buying of ₹2,320.36 crore, signaling some domestic support despite external pressures.