Archive · 29 Jul 2026
India's Market Risks: Could Leverage Trigger a Crash?
India's stock market is growing, but there are worries about too much borrowing to buy stocks.
This is called leverage.
In South Korea, too much leverage caused a big drop in the stock market.
Nithin Kamath, a big name in Indian stock trading, thinks India could face similar problems.
He says that if the market drops sharply, many people might have to sell their stocks quickly, which could make the drop even worse.
However, India has rules to control this, but no one knows for sure if these rules will be enough if a big crash happens.
South Korea's Kospi index fell 6% due to disappointing earnings from SK Hynix.
Leverage in the market magnified the decline, posing risks to investors.
Nithin Kamath warns that India's growing margin trading ecosystem could face similar risks.
SEBI's regulations aim to limit excessive leverage, but a sharp correction could still trigger forced selling.
India's market has not seen a severe correction since COVID, making the resilience of the MTF ecosystem untested.
- Who
- Nithin Kamath, founder of Zerodha
- What
- Potential market crash due to leverage in India's margin trading ecosystem
- When
- Current concerns based on recent market trends and regulatory measures
- Where
- India, with reference to South Korea's market crash
- Why
- Growing leverage in the market poses risks during a sharp correction
Market Stability
Leverage Risks
Market Resilience
Market Stability
India's market has not seen a severe correction since COVID, suggesting resilience.
Leverage Risks
The growing MTF ecosystem could amplify a market downturn, posing significant risks.
Regulatory Measures
Market Stability
SEBI's regulations limit excessive leverage, providing a safety net.
Leverage Risks
Despite regulations, a sharp correction could still trigger forced selling in small- and mid-cap stocks.
- Kospi Index Decline
- 6% on Wednesday, with an intraday fall of over 8%
- SK Hynix Profit Jump
- Nearly sixfold increase from a year earlier
- Zerodha's MTF Book
- Around ₹9,000 crore, with half in non-F&O stocks
- SEBI Regulations
- Tightened peak margin requirements and risk management norms
- Market Capitalization
- Margin-funded positions are relatively small compared to overall market cap