What is margin trading facility and how it affects markets – CNBC TV18

Margin Trading Facility (MTF) is a financial device that allows investors to buy stock by paying only one part of the total amount, while the broker funds the rest. This leveraged product can increase both profit and disadvantages, causing the investor’s trust to become particularly attractive in the markets.

However, recent market rashes have expressed concern about the role of MTF in stock movements.

Has MTF driving market declined?

According to Sripal Shah, MD and CEO of Kotak Securities, currently the overall MTF book in the market is about 78,000 crores, a figure that remains relatively stable.

They believe that it may not be accurate to connect the recent market fall directly with MTF movements.

Historically, the MTF book was around ₹ 85,000 crore in September-October 2024. Since then, aligning 10–12% decline in the Nifty in the same period, it has fallen by 9–10% to 78,000 crores.

This shows that the MTF agitation is more contemplated by wider market trends than the primary driver of market reform.

Since February 2025, NSE data supports this observation. On 7 February, MTF was 78,099 crore. It increased to ₹ 67,756 crore by 10 February, but on February 11 increased to ₹ 78,235 crore, indicating ups and downs in leveraged market posts rather than a continuous decline.

Margin call role in stock instability

Dhiraj Railley, MD and CEO of HDFC Securities, also reduced the influence of MTF on the wider market. While margin calls can affect individual stock prices, they do not greatly affect the overall market trends.

The MTF book was at the peak of about 83,700 crores in September 2024, but has since fallen to about 20% by 10 February 2025. The segments, which are heavily purchased by the high-Net-World individuals (HNI).

Despite the industry warnings about high evaluation, HNI has continued to invest in midcap, leading to a sharp improvement in these shares.

Impact on retail and HNI investors

On average, the NSE 500 shares have dropped about 31% from their peak prices, which has greatly affected retail and HNI investors. Margin calls using leverage through MTF face even more damage due to additional burden of interest payments on calls.

While margin trading can increase the profit during the market upwing, it also increases risks during recession. Investors should be cautious and assess their risk hunger before choosing for leveraged trading.

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Also read SEBI has proposed to twics in the margin play system to prevent the misuse of customers’ securities.