Market rally has margin trading book hitting a record Rs 54,537 crore in January

The recent market rally that lasted till earlier this week has the margin funding book of brokers nearly soaring 90 per cent Rs 54,537 crore as of January 16, a lifetime high for the segment, show the data from the exchanges and a research report.
The margin funding, wherein an investor pays 25-35 per cent of the stock value he or she buys and the rest is paid by brokers for a monthly interest of 12-15 per cent, stood at Rs 29,000 crore for the whole of January 2023 but jumped to Rs 54,537 crore as of January 16, 2024.

The market rally also had the cash segment of the market jumping to a record 25 per cent in December 2023, according to an analysis by Icra Ratings.

With the recovery in secondary market returns from Q2FY24, the margin trade funding (MTF) book of brokers in general and especially those led by banks, has been achieving new highs. The aggregate industry-wide MTF exposure soared 98 per cent from March 2023 when it was Rs 26,000 crore to Rs 51,000 crore in December 2023, Icra said in a report.

The agency citing the data from the exchanges said the MTF book jumped further in January to over 88 per cent from Rs 29,000 crore for whole of January 2023 to touch a record high of Rs 54,537 crore on January 16, when the indices scaled new highs with the Sensex crossing the 73,000 points mount and the broader Nifty crossing the 22,000-mark.

The aggregate MTF book of the industry had grown by 7x during the two-year period ending March 2022 to Rs 24,525 crore to Rs 51,000 crore as of December 2023, before reporting some tepidness amid dampened investor sentiment in FY2023, the report said.

Bank brokers, supported by their competitiveness in money market borrowings both in terms of size of borrowings as well as rates, have cornered a dominant market share of around 60 per cent in the MTF segment. They hold four of the top 5 positions, in terms of market share.

The MTF book stood at Rs 29,000 crore in January 2023 and then declined till May of that year and began to jump again and touched Rs 30,000 crore in June, Rs 34,000 crore in July, further rising to Rs 39,000 crore in August. It jumped to Rs 43,000 crore in September, Rs 45,000 crore in October, Rs 46,000 crore in the next month and crossing the Rs 50,000 crore mark in December at Rs 51,000 crore. Come January the rise continued and scaled to Rs 54,537 crore as of January 16, according to exchange data collated by Icra.

Primary market activity has also recovered with the active client base, which was moderating from March 2022, expanded in recent months. The average monthly demat account addition rose to 31 lakh in September 2023 from 16 lakh in April 2023.

Driven by improved investor sentiment, the industry saw a resurgence in cash segment volume with an all-time high of Rs 1.14 lakh crore in December 2023. The cash segment declined 20 per cent in FY2023 amid dampened investor sentiment.

In addition to the trading turnover, the industry witnessed an increase in the share of the inherently high-yielding delivery volume. With the notable increase in MTF exposures in recent months, the share of delivery volume stood at 25 per cent in the first eight months of FY24 compared to 23.8 per cent in FY23 and 22.2 per cent in FY2022.

On the other hand growth trajectory in the derivatives segment remains strong with a 2.1x increase in options contracts traded in the first eight months of the current fiscal, according to the report.