Zerodha co-founder Nithin Kamath has warned that the rapid growth of margin trading funding in India could become a major risk for brokers and investors if markets see a sharp fall, especially in small- and mid-cap stocks. In a post on X, Kamath said his "biggest nightmare as a broker" is what is happening in Korean markets, where a sharp rally and rising leverage have increased the risk of forced selling when prices reverse.
Kamath said the concern comes from the way Zerodha’s margin trading funding, or MTF, book has grown along with the rest of the industry. MTF allows investors to buy shares by borrowing part of the purchase amount from brokers, using securities or cash as margin.
