India's margin trading facilities (MTF) book reached another record ₹1.35 lakh crore at the end of June, representing a 6.9% growth from ₹1.26 lakh crore at the end of May, according to CNBC TV18. This growth follows the 65% year-on-year increase and 11% growth over April recorded in May, as reported by CareEdge Ratings. The sustained momentum in MTF activity contrasts sharply with futures and options activity, where average daily turnover remained largely flat sequentially due to higher securities transaction tax and Sebi's earlier curbs on speculative trading.
Reliance Industries emerged as the most leveraged stock on the MTF book as of June 30, with positions standing at ₹2,206 crore, a 41% growth from the previous month, according to NSE data reported by CNBC TV18. Infosys recorded the biggest rise among the top five stocks at 56% growth to ₹2,005 crore, while HDFC Bank slipped from the top spot in May to third position with positions declining 20% to ₹1,791 crore. Among Nifty 50 constituents, major names including State Bank of India (-43%), IndiGo (-42%), Shriram Finance (-38%), Trent (-37%), and Bajaj Finance (-35%) saw significant unwinding of their MTF positions during June.
Following Sebi's crackdown on speculative derivatives trading, India's largest discount brokers are doubling down on MTF to diversify revenue and shore up bottom lines. Market leaders Groww and Angel One derived 55% and 47% of their March quarter revenue respectively from equity derivative broking, while MTF contributed only 7-7.5% for both firms. However, MTF is growing rapidly - Groww's MTF book expanded nearly five-fold year-on-year to ₹2,814 crore in Q4 FY26 from ₹602 crore a year earlier, while Angel One's average client funding book rose 60% to ₹5,850 crore from ₹3,650 crore. Both brokers charge about 15% annual interest on MTF loans.
Unlike brokerage income, MTF generates recurring interest income for brokers as long as positions remain funded, strengthening profitability as derivatives volumes become less predictable. Groww's net profit margin expanded to almost 45% in Q4 FY26 from 36% a year earlier, while Angel One's rose to about 28% from 21%. CRISIL Ratings observed that diversified brokers have weathered the post-regulatory slowdown better than firms dependent on transaction income, with MTF interest emerging as a cushion against weaker trading activity.
Sebi appears focused on strengthening rather than restricting the MTF ecosystem, proposing in an 18 June consultation paper to allow brokers to fund MTF through listed non-convertible debentures while retaining the 50% initial margin requirement and raising the minimum net worth threshold for MTF-offering brokers to ₹5 crore from ₹3 crore. According to SAMCO Securities's Nilesh Sharma, these proposals could expand MTF books by reducing reliance on bank funding and dispersing credit risk beyond the banking system, creating a significant structural equalizer for technology-driven discount brokers against bank-backed brokers.
Despite its growth potential, MTF faces significant risks. As reported by Stoxkart's Pranay Aggarwal, during periods of heightened uncertainty, investors typically reduce leveraged cash positions first, making MTF earnings more sensitive to market sentiment swings than derivatives-led revenue. Quantace Research's Karthick Jonagadla cautioned that almost half of the industry's MTF book is backed by relatively illiquid non-F&O stocks, potentially exacerbating selling pressure during sharp market corrections. Brokers mitigate these risks through stock-level exposure limits, continuous monitoring of eligible securities, and well-collateralized funding books, while offering one-cancels-the-other orders to automate risk management.
