Korea’s leverage trap has an echo in India
They say history doesn't repeat itself, but it certainly rhymes, often with a mischievous wink and a very large margin call. India's booming retail investor scene, fueled by the siren song of 'new-age' brokers and the illusion of limitless upside, is starting to sound eerily like a familiar tune from Seoul's recent past. It seems the global appetite for quick riches, especially on borrowed dimes, is a universal language – and sometimes, a universal tripwire.
The concern is palpable: Indian brokers are extending unprecedented sums to retail investors, who, in turn, are piling into stocks at valuations that would make a seasoned investor wince. This surge in margin debt isn't just organic growth; it's being supercharged by aggressive competition among brokers, creating a dangerously inflated balloon. Should the market face a significant correction, the sheer volume of leveraged positions could trigger a cascade of forced selling, transforming individual speculative bets into a broader systemic tremor, much like the 'leverage trap' that caused jitters in Korea.
