The recent sell-off in mid- and small-cap stocks has triggered margin calls and forced investors to pare leveraged positions, pulling the margin trading facility (MTF) book to a two-month low.
The combined MTF book across the NSE and BSE fell by ₹7,516 crore in the current month through October 23 to ₹1.51 lakh crore, marking its first monthly decline in seven months.
The outstanding funded book had touched a record ₹1.59 lakh crore at the end of September. Friday alone accounted for nearly 38% of the decline, with the book shrinking by ₹2,824 crore.
The last comparable decline was in March 2026, when the MTF book contracted 8.1% to ₹1.1 lakh crore amid a sharp correction in the broader market. The Nifty Midcap and Smallcap indices had fallen more than 11% during that period.
As of October 23, the NSE’s funded book stood at ₹1.44 lakh crore, while the BSE accounted for ₹7,427 crore.
The pullback in leveraged positions comes amid mounting pressure in the broader market. Over the seven trading sessions through October 23, the Nifty Midcap index fell 6.2%, while the Smallcap index declined nearly 9%. The benchmark Nifty50, in comparison, shed less than 1%.
Market breadth has also deteriorated sharply. The BSE’s advance-decline ratio fell to 0.32 on October 23, with 1,261 stocks advancing against 3,889 decliners. The average advance-decline ratio for October has slipped to 0.83, its lowest level in seven months.
MTF growth has also moderated, with the funded book expanding about 30% so far in 2026, compared with 36% in 2025 and 70% in 2024.
Small-cap stocks are likely to bear the brunt of the recent sell-off, given that they account for 49% of the outstanding MTF book. Large-caps make up 31% of funded exposure, while mid-caps account for the remaining 20%.
Among individual stocks, HDFC Bank has the highest MTF exposure at ₹3,148 crore, followed by Reliance Industries and BSE at about ₹2,700 crore each.
“Whenever there is a sell-off of this nature, some investors and brokers are likely to pare their positions,” said Dhiraj Relli, Managing Director and CEO of HDFC Securities.
The correction has also highlighted the risks associated with leveraged investing in the broader market. Falling share prices reduce the value of collateral, triggering margin calls and, in some cases, forcing investors to liquidate positions. Such selling can intensify market declines, particularly in the more volatile mid- and small-cap segments.