Leverage trades via MTF gather steam as market momentum picks up pace

The rise in the usage of the margin trading facility comes as the Nifty index soared over 17 per cent from its April lows

Market participants have ramped up leveraged bets, or trading done via a margin trading facility (MTF), as benchmark indices are back to hovering close to record levels.

 

The total outstanding margin facility availed by traders has risen 7 per cent in June-end to a record ₹84,646 crore, according to data from the National Stock Exchange compiled by Business Standard. On a quarterly basis, the three-month period ending June saw a 24.4 per cent rise in margin loans against a decline of 17.6 per cent in the March quarter.

 

MTF enables traders to purchase securities by paying only a portion of the total cost, while brokerages bear the rest. Interest, brokerage, and square-off charges are other costs that will be levied against the traders.

   

The rise in the usage of this facility comes as the Nifty index soared over 17 per cent from its April lows. When the index fell to 'correction territory' in March, the outstanding loan fell to ₹68,070 crore by the month end, as the selloff had cooled risk-taking ability.  

 

 

"When market activity and participation increase, margin trading typically rises as both trading volume and value go up. Since the margin is directly linked to traded value, MTF activity is expected to go up further as a byproduct,” explains Deven Choksey, managing director of DRChoksey FinServ. 

Double-edged sword?

In the capital market segment, trading members are required to collect a minimum upfront margin of 20 per cent before executing a trade. The facility has become useful for small traders as it offers up to four to five times leverage. The rise in outstanding MTF comes after Sebi, earlier this year, implemented new measures to curb speculative activities in derivatives by retail investors.

 

The rise in margin trading facilities does not necessarily raise concerns, analysts said. With the regulator mandating a 20 per cent margin and a robust system in place, the growing margin exposure is seen as a natural outcome of rising market volumes. “The system has been balanced well,” Choksey adds.

 

However, High MTF levels, according to Tanvi Kanchan, head - strategy at Anand Rathi Shares and Stock Brokers, represent both opportunities and risks for market stability. On the positive side, it enhances market liquidity and allows broader retail participation. It amplifies both gains and losses, creating systemic risk if concentrated in specific stocks or sectors, she added.

 

"The current market environment, with indices hitting new highs, has created a perfect storm for increased margin trading activity," Kanchan noted. Increased retail participation, low MTF interest rates are among the other reasons, she said. 

Market recovery

The markets, meanwhile, have staged a smart recovery from their April 2025 lows with the mid-and smallcaps outperforming their large-cap peers with a rise of 27 per cent and 35 per cent respectively, data shows. The Nifty and the Sensex have moved up 17 per cent during this period.

 

For the recently concluded June 2025 quarter, the Midcap indices saw a 15.5 per cent sequential jump, while Nifty50 saw a 8.5 per cent rise. In the same quarter under review, the Nifty Small cap index gained 18.5 per cent.

 

"This correlation (between rise in MTF and index performance) presents significant risks and reflects a well-established behavioural pattern among retail investors who are drawn to leveraged trading in small-cap stocks for several compelling reasons. The availability of MTF on small-cap stocks has expanded significantly, with brokers now offering MTF on over 1,000 plus stocks at competitive rates," Kanchan said.