Zerodha's Nithin Kamath highlights brokerage math in MTF boom

Nithin Kamath, founder and CEO of Zerodha, has cautioned traders against overlooking brokerage costs while using margin trading facility (MTF), even as the leveraged segment witnesses strong growth.

In a post on social media, Kamath said that while many traders closely track the daily interest rate charged on borrowed funds, they often ignore brokerage expenses, which can significantly increase overall trading costs. He noted that because MTF is a leveraged product, traders are already exposed to amplified risk, and failing to account for transaction costs can push the breakeven point higher.

Kamath highlighted that brokerage charges, particularly on shorter holding periods and small price movements, can make the difference between a breakeven trade and a loss.

 

To illustrate the point, he shared an example of a Rs 10 lakh MTF trade held for 30 days with Rs 5 lakh borrowed. The comparison showed that while interest costs may appear similar across brokers, brokerage structures can materially alter the total cost. In the example, total costs, including interest and brokerage, ranged between roughly Rs 5,890 and Rs 8,500 depending on pricing models.

The illustration excluded statutory and other charges such as STT, GST, exchange and clearing fees, DP debit fees and pledge-related costs, which can further impact returns.

Kamaths comments come amid growing retail participation in leveraged products, with MTF volumes expanding as traders seek to amplify short-term gains. However, he underscored that leverage magnifies both profits and losses, and cost awareness is critical to managing risk effectively.

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