Retail traders in India are scaling back the money they borrow to buy shares, as the stock market slides and the rally in smaller companies loses steam.
Borrowed positions have dropped to 1.56 trillion rupees. That follows a record high reached in September, which means investors who had piled into leveraged trades have since been unwinding a good part of them.
The pullback comes as share prices weaken more broadly. The NSE 500 Index has fallen almost 9% from its peak. The damage has been heaviest among smaller and mid-sized companies, which have dropped significantly. These stocks had been the favourite targets of many retail investors during the earlier run-up, so the reversal has hit those who relied on borrowed money particularly hard.
Margin funding lets traders buy more shares than their own cash would allow, by borrowing against their holdings or deposits. It can magnify gains when prices rise, but it also magnifies losses when they fall. When the market turns, traders who have borrowed heavily often have to sell, either to cut their risk or to meet demands for more collateral. That selling can in turn push prices down further.
Two other pressures have added to the strain on equities. Higher interest rates make borrowing more expensive and can make shares look less appealing compared with safer returns. At the same time, oil prices have stayed stubbornly high, which weighs on the outlook for the market.
Taken together, the fall in the NSE 500, the drop in smaller stocks and the retreat from leverage point to a market where retail enthusiasm has cooled sharply since September’s peak in borrowing. Whether the unwinding continues will depend on how share prices behave from here, but for now traders are choosing to reduce their exposure rather than add to it.