Margin Trading Facility (MTF), often called e-margin or Pay Later, is a way for brokers like lend money to customers so they can buy stocks. The investor just has to pay a small part of the whole deal value up front, and the broker pays the rest. MTF trading lets you use your money to acquire more shares than you could with only your own money, up to 5 times on more than 1500 equities that qualify. The part that is borrowed has to pay interest (for example, 9.69% per year or 0.027% per day), and there are no temporal constraints on how long positions can be kept. It lets you trade without cash by utilizing shares or ETFs you already own as collateral in your Demat account.
Activation
No further paperwork is needed. You can agree to the disclaimer online through the broker’s app or website, or offline by email or a form. Anyone can sign up for any brokerage plan, but premium programs may have cheaper prices.
Fees: 9.69% interest per year on the amount funded; brokerage fees according to the plan (limited by SEBI); no particular pledging fees indicated, however taxes apply.
Advantages
- You can buy more with up to 5 times the leverage.
- Long-term plans can be held for an unlimited amount of time.
- Using shares or ETFs as collateral makes it easy to do business without cash.
- Low daily interest, like ₹14 on a ₹50,000 loan.
- Get expert stock selections and research.
Dangers
- Losses are bigger because of leverage.
- If stock prices go down, you will get margin calls, which means you need more money.
- Ongoing interest is cutting into profits.
- Market changes that happen quickly cause losses.
Advice
Don’t put all your money in one sector; use expert picks (like Kotak’s MTF recommendations); make exit plans; and don’t trade based on your feelings. For the short term, look at equities that are volatile yet have been studied.
Using the MTF Calculator
The MTF Calculator can help you figure out your margins, how much you can borrow, how much interest you’ll pay, and how much you could make on trades. It is for informational purposes only and assumes up to 5x leverage on more than 1300 companies.
Inputs
- Market Price (₹): The price of the stock right now.
- Number of shares: Quantity.
- Holding Period (days): How long the position lasts.
- Target Price: The price you hope to get when you sell.
- Brokerage Plan: Affects the rate (for example, 9.69% p.a.).
Results
- You Pay (Margin): The amount you pay up front.
- Kotak Pays (Borrowed): The money that the broker gives you.
- Total Invested: The value of the trade.
- Interest: Daily on borrowed money (for example, ₹64 on ₹8,000 for 30 days).
- Returns with and without MTF: Possible profits and losses.
- Net Profit/Loss and Break-even.
One thing you must bear in mind at all times is that you must verify your information before you proceed. The landscape of trading is vast and it is easy to lose one’s way.
