Broker-Funded Stock Book Sees Record Single-Day Cash Outflow of Near Rs 3,000 Crore Amid West Asia Tensions

The broker-funded client book, known as the margin trading facility, saw its biggest single-day net outflow of almost 3,000 crore rupees on Friday. Data released late Monday by the online portal mtf.trading shows this was the highest liquidation of leveraged positions since the portal began tracking data in January 2017. Rising oil prices caused by a worsening war in West Asia triggered the massive sell-off. This pushed Brent crude up by 2.8 percent to 111.7 dollars a barrel on Friday and drove sharp intraday swings in the stock market. The Nifty swung 415 points, or 1.85 percent, between a low of 22,372 and a high of 22,787 before closing 0.4 percent lower at 22,600, according to Kruti Shah, a quant analyst at Equirus.

Market Impact

The combined NSE and BSE margin trading facility book dropped by almost 3,000 crore rupees on a net basis to 1.51 trillion rupees on Friday. Funded stocks that saw square-offs by brokers include PC Jewellers at 78 crore rupees, Infosys at 17 crore rupees, Reliance Industries at 34 crore rupees, HDFC Bank at 42 crore rupees, and BSE at 46 crore rupees. SK Joshi, a consultant at Khambatta Securities, said provisional buying by both foreign portfolio investors and domestic institutional investors helped absorb the shock. Foreign investors made provisional net purchases of cash shares worth 888 crore rupees, while domestic investors bought 3,235 crore rupees.

Context

Margin trading lets investors buy stocks using borrowed money from brokers, who typically fund 60 to 75 percent of the purchase value in exchange for annual interest. When stock prices drop sharply, brokers issue margin calls requiring clients to top up funds, and fail-to-pay situations force brokers to sell off the shares to recover dues.