Introduction

What is a Margin Trading Facility (MTF)?

How MTF Works in Practice

• Stock purchase value: ₹1,00,000
• Your margin contribution: ₹25,000
• Broker funding: ₹75,000
• Daily interest on ₹75,000: ₹36.98

Collateral in MTF

• Cash: You can deposit cash as collateral to secure the borrowed funds.
• Shares: You can pledge shares from your demat account as collateral. The value of the pledged shares should be higher than the borrowed amount.

 What Margins Will I Get for Trading?

Key Advantages of MTF:

• Enhanced Buying Power: MTF significantly boosts your purchasing power, allowing you to capitalize on market opportunities with limited upfront capital.
• Leverage for Better Returns: By leveraging your investment, you can potentially amplify your returns. A small price movement can lead to substantial gains.
• Utilization of Idle Assets: You can use shares from your demat account as collateral to fund your trades, optimizing the use of your assets.
• Improved Market Liquidity: MTF can help you take advantage of time-sensitive investment opportunities, as it provides the necessary liquidity.
• Controlled Risk: MTF is typically offered for select, liquid stocks, minimizing risk exposure.
• Long-Term Wealth Creation: While MTF involves borrowing, the potential for long-term growth and wealth creation is substantial.

Important Considerations:

• Interest Costs: Remember that you'll need to pay interest on the borrowed amount.
• Market Risk: While MTF can amplify gains, it can also magnify losses if the market moves against you.
• Regulatory Guidelines: Adhere to SEBI's regulations and your broker's terms and conditions to avoid penalties.

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