Indian stock brokers are increasingly turning to the debt market to fund margin trading, accounting for 21% of commercial paper issuance in 2024, up from 4% in 2021. They raised approximately $33 billion (3.2 trillion rupees) to support leveraged equity bets, as margin trade values approached a record 1.6 trillion rupees. Stricter regulations from the Reserve Bank of India and the Securities and Exchange Board of India have pushed brokers toward alternatives like commercial paper and bonds.
Major players including HDFC Securities Ltd., ICICI Securities Ltd., and Kotak Securities Ltd. are leading issuers of short-term debt. Despite margin loans representing less than 0.5% of India’s $4.8 trillion stock market, rapid growth has raised concerns. Nithin Kamath of Zerodha Broking Ltd. warned of risks from a potential market decline, while industry funding books have more than tripled in three years, reflecting sustained demand for leverage.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing