Negative impactEconomy
'Biggest nightmare': Nithin Kamath warns MTF boom could worsen selloff in small and midcap stocks
Economic Times 37 min ago·29 Jul 2026, 12:27 pm
Zerodha co-founder Nithin Kamath has raised a significant warning about the Indian stock market, specifically concerning small and mid-cap stocks. He highlighted that the rapid expansion of margin trading funding (MTF) is creating a potential risk for investors. Kamath suggested that this surge in leverage could amplify market downturns, making the current selloff potentially more severe than usual.
This situation matters to investors because high leverage forces traders to sell assets quickly to cover losses, which can trigger a vicious cycle of selling. While SEBI has implemented safeguards, the sheer volume of margin funding is creating liquidity constraints. This dynamic can lead to forced selling, potentially driving prices down faster than the underlying market fundamentals would suggest.
Investors should monitor the volume of margin funding and the liquidity in small and mid-cap stocks closely. It is crucial to understand the extent of leverage in your portfolio. As Kamath noted, the combination of forced selling and liquidity crunches can exacerbate volatility, so maintaining a cautious approach during these periods is advisable.
Key takeaways
- Category: Economy.
- AI reads the tone as negative (potentially bearish) for the stock.
- Assessed as a significant, market-relevant update.
Why it matters
A meaningful update worth tracking. The tone is negative — watch for downside reaction. Use the price and stock snapshot to gauge how the market is responding.
