Margin trading: Track trades, set stop-losses, focus on quality stocks

Be on the alert for margin calls, have liquidity for top-ups, especially in volatile markets

The outstanding margin trading facility (MTF) book of domestic brokerages crossed ₹1 trillion for the first time this month, rising 2.3 times over the past year. At the peak of the Covid crisis in March 2020, the book stood at under ₹3,200 crore. Investors should clearly understand the benefits and drawbacks of this facility before opting for it.

 

How MTF works 

Investors pay part of the transaction value upfront as margin, while the broker funds the rest. “The margin can be put up in the form of cash or approved securities. The purchased shares remain pledged until the loan is