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Feb 16, 2026 - Why Capital Market Stocks are falling

Why Capital Market Stocks are falling

Feb 16, 2026

Image source: Rasi Bhadramani/www.istockphoto.com

Indian markets snapped their losing streak on Monday, supported by gains in financials and energy stocks, along with additional strength from the pharma and healthcare sectors.

Market breadth remained positive, with 35 Nifty stocks ending in the green and the remaining 15 in the red.

Despite the positive sentiment, the capital markets segment drew attention as several stocks declined up to 7% in trade.

The stocks that declined included names such as BSE (down 7%), Angel One (down 5%), Geojit Financial Services (down 4%), and Groww (down 3%).

Here's why...

RBI Rules on Capital Market Positions

The RBI circular outlines how banks can lend against shares and other financial collateral.

The rules take effect from 1 April 2026 and apply to all commercial banks operating in India. While the circular targets banks, it has indirect implications for capital market intermediaries such as brokers and trading firms.

Tighter Margin and Leverage Framework

The new norms tighten leverage and margin funding structures used by brokers.

Margin requirements have increased when brokers pledge equity and other instruments as collateral.

Changes in Bank Guarantees

Brokers typically use bank guarantees as collateral with stock exchanges. Under the new rules, these guarantees must now be backed by cash.

This increases working capital requirements for brokers and raises funding costs.

Proprietary Trading Requirements

For proprietary (prop) trading positions, the RBI now requires 100% collateral margin.

50% must be maintained in cash
50% may be held in cash equivalents or government securities

Impact on Margin Trading Funding (MTF)

Margin trading funding books may also be affected by this circular.

Loans provided by brokers to clients must now be fully secured. Equity collateral will be valued after a 40% haircut.

Listed Stocks Performance

What Next?

These reforms could lead to a decline in derivatives (F&O) volumes and margin-funded cash market activity.

Also, higher collateral requirements may increase borrowing costs for brokers, putting pressure on profitability.

Brokerages with lower dependence on derivatives volumes may be relatively better positioned. The focus of capital market firms may shift toward the cash market-led brokerage growth rather than derivatives-driven revenue.

Conclusion

Recent regulatory measures - including increased derivatives lot sizes, the securities transaction tax (STT) hike in the Union Budget, and tighter margin and collateral requirements - indicate a clear intent to curb excessive retail participation in derivatives markets.

In the short term, these steps may reduce trading volumes and increase working capital needs across the ecosystem.

Over the long term, however, they could strengthen market stability by reducing leverage and systemic risk.

For more detailed updates, check the latest Capital Markets sector results.

Investors should evaluate the company's fundamentals, corporate governance, and valuations of the stock as key factors when conducting due diligence before making investment decisions.

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

Happy investing.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...

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