Drawing parallels with the recent turmoil in South Korea’s stock market, Kamath said his “biggest nightmare as a broker” is seeing a similar sequence play out in India as leverage builds across the financial system.
“The source of my nightmare is the way our MTF book has been growing along with the industry,” Kamath said in a post on X. “In terms of pure risk, MTF is by far the biggest risk we have taken since we started in 2010.”
Zerodha’s margin trading facility (MTF) book has grown to around ₹9,000 crore, with nearly half the exposure concentrated in non-F&O stocks. According to Kamath, these stocks carry greater risk during a market downturn as they can hit successive lower circuits, leaving investors and brokers with little opportunity to exit positions.
Meanwhile, rival Groww had an outstanding MTF book of ₹3,775 crore at the end of June 2026, translating into a market share of nearly 3%. The combined outstanding MTF book across the NSE and BSE has climbed to a record ₹1.44 lakh crore, up 23% so far this year after surging 36% in 2025. Notably, the top 128 stocks account for nearly half of the industry’s total MTF exposure.
Kamath explained that prolonged market rallies often encourage investors to take on higher leverage as rising collateral values allow them to borrow more. The risk is further amplified when leveraged products such as derivatives and leveraged ETFs magnify both gains and losses.
In the event of a sharp correction, falling collateral values trigger margin calls, forcing investors to liquidate their holdings. This, in turn, can accelerate the decline, creating a self-reinforcing cycle of selling pressure.
While margin trading has gained popularity only over the past three to four years, Kamath noted that the Indian market has not witnessed a severe crash comparable to the COVID-19 sell-off during this period. He cautioned that although MTF remains a relatively small proportion of the overall market capitalisation, a steep market decline could still trigger significant selling pressure across hundreds of small- and mid-cap stocks, given that brokers now offer MTF on nearly 1,500 stocks.
Kamath, however, credited SEBI’s regulatory framework with preventing excessive leverage in the Indian market, saying the regulator’s measures have helped avoid the kind of unchecked borrowing seen in some overseas marketsNithin kama
