What is a Margin Trading Facility (MTF)?
Margin Trading Facility (MTF) allows you to buy more shares than your capital would allow you to. Let’s say a stock has a 25% margin requirement. This means you only need to put up 25% of your funds, and INDmoney provides the remaining 75%. In simple terms, for every ₹1 you invest, you can buy stocks worth ₹4.
This provides you with higher market exposure without requiring you to block the full amount. But keep in mind that you also pay interest on the borrowed money. So it's important to track both your returns and the cost of using MTF.
What is MTF Return Calculator?
The MTF Returns Calculator helps you analyse how your trade would perform with and without using the Margin Trading Facility (MTF). When you trade using MTF, you're borrowing money to increase your position in a stock. This can boost your profits if stock moves in your direction but it also comes with interest costs. Many users don’t realise the actual impact of these costs on their final returns, and therefore, we have created the MTF calculator.
The calculator shows a side-by-side comparison:
- What your returns look like if you invest fully with your own money
- What your returns look like if you use MTF, after factoring in interest cost
This makes it easier to see whether using a margin is benefiting you or not.
How to Use MTF Calculator: Step-by-Step
- Select your stock: Start by choosing a stock from the list of margin-eligible stocks. These are the stocks that you can buy using MTF on INDmoney.
- Check or edit the buy price: The calculator automatically fills in the latest traded price of the stock. You can keep it as is or enter your buy price if you're planning a different entry point.
- Enter the quantity: Type in the number of shares you want to buy. For example, 100 shares of Reliance Industries. This will determine the total trade value and help calculate your margin requirement.
- Choose your holding period: Enter for how many days you plan to hold the stock. The calculator uses this to estimate the interest cost on the borrowed amount.
- Review or set your sell price: The sell price is pre-filled at 10% above the buy price, but you can adjust it based on your target. This helps the calculator estimate your expected profit or loss.
- View your results: Once all inputs are in, the calculator shows a clear comparison between trading with and without MTF. You’ll see the total trade value, how much you pay, how much INDmoney funds, the interest cost, and your final profit in both cases.
Example: How a Trade Looks with INDmoney MTF
Let’s say you buy 100 shares at ₹500 each, making the total trade value ₹50,000. With a 26.5% margin requirement, you only need to invest ₹13,262 from your funds. The remaining ₹36,737 is funded by INDmoney through the Margin Trading Facility. You plan to sell the shares at ₹550 after holding them for 10 days.
The calculator will show:
- Profit without MTF is 9.52% after deducting all the charges
- Profit with MTF is 35.08% after deducting charges and interest expense.
This helps you decide whether using MTF improves your returns.
Key Factors That Affect Your MTF Trade
- Stock Margin: Each stock has a different margin percentage. A lower margin means higher leverage but also more risk.
- Interest and Holding Period: INDmoney charges interest only if the funded amount is above ₹10,000. The rate is 0.04 percent per day.
- Charges: Your trade is subject to brokerage, pledge and unpledge fees, taxes, and DP charges. All these are automatically calculated by the tool.
Advantages of Using MTF
- More buying power: With MTF, you don’t need to pay the full amount for a trade. For example, if you want to buy ₹1,00,000 worth of a stock and the margin required is 25%, you only need ₹25,000 to buy ₹1,00,000 worth of a stock
- Chance to earn more: If the stock moves in your favour, your return on the invested amount can be much higher. For instance, if you use ₹25,000 of your money to buy ₹1,00,000 worth of shares, and the stock goes up 5%, your profit (after interest) can be more than what you'd earn without margin.
- No need to sell other stocks: Let’s say your money is already invested in long-term stocks, but you find a short-term opportunity. With MTF, you can take the new trade without selling your existing holdings.
Risks of Using MTF
- Interest cost: Interest is charged daily, even on weekends. For example, if you borrow ₹75,000 for 10 days at a daily interest rate of 0.05%, you’ll pay around ₹375 just in interest. If the stock doesn’t move much, this cost can eat into your profit.
- Losses can be magnified: Leverage works both ways. If the stock price drops 5%, and you’re using a 4x margin, your actual loss (on your ₹25,000 investment) will be much higher. So small price changes can lead to bigger losses.
- Market Movement: Say you’re holding a leveraged position and the stock falls suddenly. Without a stop-loss or alert, you could lose more than planned or get a margin call asking you to add funds to keep the trade open.
Practical Tips for Using MTF with INDmoney
- Interest is charged daily, including weekends: MTF interest is calculated daily, and this includes weekends and holidays too. So even if the market is closed, the interest on your borrowed amount keeps adding up. Always factor this in while deciding how long you plan to hold a position.
- Use conservative price targets: Avoid overestimating profits. Set realistic targets so you get a better idea of how much you’ll earn after interest and charges.
- Check the calculator before placing any trade: Always run your trade through the MTF Calculator. It shows how much you’ll pay, how much you’ll gain, and whether using margin is worth it.
- Use alerts or stop-loss to manage risk: Leverage can amplify both gains and losses. Set alerts or stop-loss levels to avoid large losses if the stock moves against you.
Conclusion
MTF can be a useful tool if you want to take larger positions without using 100% of your funds. It gives you more buying power and a chance to earn better returns if the stock moves in your favour. But since there’s interest involved, it’s important to track the cost as well. The MTF Calculator makes this easier by showing a clear comparison of returns with and without margin. This helps you plan your trade better. Just enter basic details and you’ll know if margin trading is right for your trade before you even place it.