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MTF — Margin Trading Facility explained

MTF lets you buy stocks with borrowed money from your broker. You put up a fraction of the cost and the broker funds the rest — at an interest rate that can quietly eat into your returns.

What is MTF?

Margin Trading Facility (MTF) allows you to buy stocks by paying only a portion of the total value — typically 20–50% depending on the stock. Your broker lends you the remaining amount. Unlike intraday leverage, MTF positions can be held for days, weeks, or even months.

MTF is only available on stocks approved by the exchange under the Group 1 category. You cannot use MTF on F&O, IPOs, or non-approved securities.

How MTF interest works

The broker charges daily interest on the funded amount. Interest accrues from the day you take the position and is debited when you sell or at periodic intervals. The rate is annualised, but since you pay daily, even a short holding period adds up.

For example, if you buy ₹1,00,000 worth of stock and put up ₹50,000, the broker funds ₹50,000. At 14% annual interest, you pay roughly ₹19 per day. Hold for 30 days and that's ₹575 in interest alone — before brokerage, taxes, and other charges.

MTF rates by broker

  • HDFC Securities: ~12% per annum — among the lowest, leveraging their banking arm's cost of capital.
  • Dhan: 12.49% per annum — competitive for a discount broker, with a clean MTF interface.
  • Zerodha: 14.60% per annum — moderate rate, positions auto-squared off if margin drops below threshold.
  • Upstox: 18.25% per annum — significantly higher, making short-term MTF trades expensive.

The difference between 12% and 18% on a ₹5 lakh funded amount over 60 days is roughly ₹4,930 — real money that directly impacts your breakeven point.

When MTF makes sense

MTF can be useful when you have high conviction on a short-term price move and want to amplify returns without liquidating existing investments. It's also used by traders who want delivery-based positions with leverage — something intraday doesn't offer.

The key is duration. MTF works best for holding periods of a few days to a couple of weeks. Beyond that, interest costs start to erode potential gains significantly.

Risks of MTF

  • Interest compounds silently: Unlike brokerage which is a one-time cost, MTF interest accrues every day you hold the position.
  • Margin calls: If the stock price drops, your broker will ask you to add more margin. Fail to do so and they'll square off your position — often at the worst possible time.
  • Forced liquidation: Brokers can sell your MTF shares without notice if your margin falls below the required level.
  • Amplified losses: Leverage cuts both ways. A 10% drop on 2x leverage means a 20% loss on your capital.
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