Consider this scenario: A trader has ₹50,000 available and two stocks on the watchlist. Through Margin Trading Facility (MTF), that amount could support a ₹2 lakh position in one stock but only ₹1.25 lakh in another. The broker and account are unchanged. Why the difference? Because “up to 4x” is a ceiling, not a fixed multiplier. Margins reflect the stock and the broker’s risk rules.
The First Test: Is the Stock Eligible for MTF?
MTF allows traders to purchase approved shares by paying part of the transaction value upfront, while the broker finances the balance. Under SEBI's framework, only Group I equity shares and eligible Group I equity ETFs qualify for the facility. Therefore, merely being listed on NSE or BSE does not make a stock eligible for MTF.
A stock's eligibility depends largely on its liquidity. According to NSE's classification rules, Group I stocks must ordinarily have traded on at least 80% of trading days during the preceding six months and have an average impact cost of 1% or less. Impact cost measures the cost of executing a trade relative to the prevailing market prices, helping assess how easily shares can be bought or sold without significantly affecting their price.
These classifications are reviewed monthly, meaning a stock's MTF eligibility can change. Even a popular or widely traded stock may not qualify, and brokers may apply additional restrictions to their approved MTF stock lists.
Bajaj Broking is one of the few broking platforms in the country, which offers up to 4x buying power on more than 1,000 MTF-approved stocks (subject to stock-specific margin requirements).
Why Two Eligible Stocks Can Have Different Margins
Even when two stocks qualify for MTF, the amount a trader needs to pay upfront may differ. This is because margin requirements depend on the risks associated with each stock.
SEBI uses two measures to determine the minimum margin: Value at Risk (VaR), which estimates potential losses from price movements, and Extreme Loss Margin (ELM), which provides an additional cushion against unusually sharp fluctuations.
Under SEBI's framework, Group I stocks available in the Futures and Options (F&O) segment require a margin of VaR plus three times ELM, while other eligible Group I stocks and equity ETFs require VaR plus five times ELM.
For example, assume two stocks have a VaR of 10% and an ELM of 5%.
● F&O-eligible stock: The margin would be 10% VaR + (3 × 5% ELM) = 25% upfront margin.
● Non-F&O Group I stock: The margin would be 10% VaR + (5 × 5% ELM) = 35% upfront margin.
This means a trader with ₹50,000 could purchase shares worth ₹2 lakh in the first case, compared with approximately ₹1.43 lakh in the second. These are illustrative minimum-margin calculations, and brokers may require higher margins depending on their risk policies.
What the Numbers Mean for Your ₹50,000
| Illustrative Initial Margin | Trader's Contribution | Maximum Purchase Value | Approximate Buying Power |
|---|---|---|---|
| 25% | ₹50,000 | ₹2,00,000 | 4x |
| 35% | ₹50,000 | ₹1,42,857 | 2.86x |
| 40% | ₹50,000 | ₹1,25,000 | 2.5x |
The figures assume that the entire ₹50,000 is used as the initial margin and that other limits do not apply. Real requirements vary and can change. The table is not a quotation of margin rates for any named stock.
A higher required margin means less borrowed exposure, but it should not automatically be read as a recommendation to prefer the lower-margin stock. Nor does a share’s market price—₹200 or ₹2,000—tell you its available leverage.
The Broker Has a Say Too
SEBI prescribes the regulatory framework, but exchanges and brokers can demand more margin based on risk. A broker may also exclude an otherwise eligible security from its approved list or impose client-specific funding limits. Eligibility and margin requirements can change, so last week’s available leverage is not necessarily today’s.
A larger position also creates a larger rupee loss when prices fall. If the margin supporting a funded purchase becomes insufficient, a trader may need to provide more collateral or reduce the position.
Checking MTF Limits with the Bajaj Broking MTF Calculator
Bajaj Broking‘s MTF stock list lets traders check available securities and stock-specific percentages, while the MTF calculator can estimate upfront margin, broker funding and interest for a proposed holding period. The applicable values should be confirmed on the order screen before placing a trade.
The important question is not simply, “How much can I borrow?” It is, “Why does this stock require this margin and can I manage the position if conditions change?” Four-times buying power is an upper limit. Sound judgement starts with knowing what determines the number.
Standard Disclaimer
Investments in securities market are subject to market risk, read all related documents carefully before investing.
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Disclaimer: This article is published in association with Bajaj Broking and not created by TNM Editorial.