MTF Book Signals Potential Small-Cap Market Bottom

• Small and midcap stocks are facing selling pressure, causing retail investor portfolios to bleed, despite the Nifty being near all-time highs.
• The rise of Margin Trading Facility (MTF) has significantly increased market leverage, with industry-wide exposure growing from Rs 80,000 crore to nearly Rs 1,18,000 crore in one year.
• Historically, a simultaneous decline in the MTF book and the BSE Small-cap Index has often preceded market reversals and positive forward returns.
• The MTF book recently turned negative by Rs 434 crore for December 2025, coinciding with a falling BSE Small-cap Index, indicating an early phase of a potential market bottoming process.
• Investors should monitor the MTF trend closely as a dip alongside the small-cap index suggests unwinding of excess froth, potentially leading to healthier market conditions.

Why It Matters: Investors can use MTF trends to spot potential small-cap market bottoms.