MUMBAI: A huge fall in commodity stocks like steel , copper and crude resulted in brokers making margin calls on their clients and even cutting positions of clients who couldn’t meet the margin shortfall, exacerbating the collapse of small-cap and Mid-cap shares on Monday .
The Nifty Smallcap 100 and Nifty Midcap 100 tanked over 3% and 2% each even as the Nifty and Sensex closed in the green after a volatile session. Late Monday evening, rumours also did the rounds of a Mumbai-based online Broking firm being unable to fulfil some retail client payouts .
This means the broker could not credit payment to the account of a client who squared off his positions. Analysts said the steep fall in stocks across the board , particularly commodity stocks of late, on recessionary fears sparked by global central banks’ tightening monetary policy , resulted in huge losses for investors .
Clients who trade on cash segment against 50% collateral (cash or stocks) who couldn’t meet margin shortfall saw many brokers selling their shares kept as collateral . This is believed to have exacerbated the fall in mid caps and small caps Monday .
The fact of margin calls being made Monday pressuring the small and midcap segments was confirmed by Kamlesh Shah, president of nodal broker body ANMI and Rajesh Baheti, director , Crosseas Capital. Margin call is made when the client faces a shortfall in margin placed with broker to trade on cash or the derivatives segment of stock exchanges.