Margin trade on the rise

Not long ago, options trading was the go-to for retail investors chasing leverage. Cheap premiums, weekly expiries and easy access made it irresistible. Then SEBI cracked down, bigger lot sizes, stricter rules and higher costs quickly took the shine off.

As a result, retail activity in F&O has already slowed, with turnover dropping 11% and the number of active traders down by 20% since the new rules came in. Against this backdrop, investors are turning to regulated, more transparent margin trading facilities (MTF), offering controlled leverage and ownership of shares.

In the first week of August 2025, the industry’s MTF book touched a record ₹96,000 crore, more than 3x the size it was in March 2022. And this boom has come despite markets swaying on tariff talk and global jitters.

To put the growth into perspective, here’s how the MTF book has climbed over the past three years:

Source: Economic times, news articles

That’s a clear upward march, showing just how fast MTF has gained ground.

So, what’s drawing people in?

How does MTF actually work?

Think of MTF as buying on credit. You put in part of the money, your broker funds the rest, and you pay them interest, usually between 9 and 15% per year.

Example: you want to buy shares worth ₹1,00,000. You only need to put down around ₹20,000–₹25,000. The broker covers the rest, and you pay interest on that borrowed chunk.

Typically, brokers allow 2–4x leverage. Compared with F&O, it feels simpler: no Greeks, no expiry dynamics, just a straight call: does the expected upside beat the borrowing cost?

Why is MTF booming now?

So, what’s fuelling MTF’s rise in 2025? A mix of market optimism, technology, and regulation is behind the surge:

• Market rebound: Nifty’s run from ~21,000 to ~25,000 revived risk appetite; MTF adds controlled firepower.

• Digital brokers: More platforms now offer MTF with slick onboarding and 9.5–9.75% rates, boosting access for younger investors.

• Lower risk vs F&O: Moderate 2–4× leverage, no expiries, and simpler mechanics.

• Liquidity boost: Real share ownership deepens cash-market liquidity instead of adding speculative churn.

• Regulated product: SEBI oversight makes MTF feel legitimate and transparent for retail investors.

Pros and cons of using MTF

MTF (Margin Trading Facility) isn’t your typical high‑octane leverage play—it’s a structured, regulated tool that can be smart if used right. Especially appealing to younger, savvy investors, it offers a way to level up trading while still maintaining control. Here’s the lowdown, blending your voice with solid backing from experts:

Pros

• Boosted buying power: Invest in shares beyond your cash capacity, backing high-conviction ideas without tying up all funds.

• Amplified returns: Leverage magnifies gains when trades move your way, if used carefully.

• Diversified access: MTF opens doors to higher-value or multiple stocks that would otherwise be out of reach.

• Ownership of shares: Unlike F&O, you hold the stock where you have certain benefits like dividends, voting rights, no expiry pressure.

• Regulated framework: SEBI-backed rules ensure standardised margins and risk controls.

Cons / Risks

• Interest cost: Borrowing comes at 9–15% p.a., which can quickly eat into returns.

• Margin calls: Falling prices may trigger top-ups or forced liquidations.

• Amplified losses: Just like gains, losses can multiply with leverage.1

• Behavioural risk: Easy access tempts over-trading and emotional decisions.

• Volatility impact: Choppy markets can wipe out positions before you react.

Outlook

The rise of margin trading facilities shows how quickly India’s investing landscape is evolving. With SEBI tightening riskier products, digital platforms expanding access, and investors seeking new ways to participate, MTF is emerging as a middle ground, offering leverage, but within a regulated and transparent framework.

The bigger question now is whether this surge reflects a genuine shift towards more responsible investing or simply a fresh appetite for risk in a different form.