Margin Deleveraging Lags Market Slide, Suggesting Resilience Among Retail Traders
Market Resilience Amid Correction
Retail and high-net-worth investors have shown resilience in the face of recent market correction, with leverage unwinding at a slower pace than the broader selloff, according to broker data and market participants.
Margin Trading Facility (MTF) positions declined 9% from Rs 25,178 crore in February to Rs 22,957 crore in March, even as the Nifty fell 11% during the month. This contraction is consistent with the steeper correction in broader markets, indicating a lack of panic among investors despite volatility driven by the US-Iran conflict, supply-chain disruptions, and rising oil prices.
Market experts attribute the resilience to the confidence of investors, who have been making use of dips to pick stocks. Rajesh Palviya, Head of Research at Axis Securities, expects the market to pick up momentum if news flow remains neutral, with the Nifty potentially trading around 23,500 to 23,800.
Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data
Dhiraj Relli, MD & CEO of HDFC Securities, notes that market uncertainties are well-known, and a correction is happening. Customers are squaring off some positions, leading to deleveraging, which could be in the range of Rs 20,000–30,000 crore, with the top two to three brokers accounting for a larger share of exposure.
The earlier build-up in MTF exposure was partly driven by leverage in gold and silver exchange-traded funds, which is now unwinding. However, the story in stocks is different, with investors still active in high-quality stocks like L&T.
Key Takeaways
- MTF positions declined 9% from Rs 25,178 crore in February to Rs 22,957 crore in March.
- Deleveraging could be in the range of Rs 20,000–30,000 crore.
- Investors remain confident, with the Nifty potentially trading around 23,500 to 23,800.
- Fresh SIP inflows may hover around Rs 26,000 levels, but growth in SIPs may come to a halt due to prolonged uncertainty.
Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline
Investor Takeaway
Investors should expect market momentum to pick up again if positive news flow continues.
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