Mumbai: The sharp swings in the stock market of late have not dimmed individual investors' appetite for taking borrowed bets on shares.The money borrowed under the brokers' margin trading funding (MTF) facility - a system allowing investors to borrow to buy shares they cannot afford - swelled by 50% jump last week from March 31, as interest rate cuts on loans for trading in the market recently has encouraged individuals to use more of this funding product.The total MTF book stood at ₹84,800 crore on Friday, against ₹57,101 crore as of March 31. On June 30, it stood at ₹73,577 crore.The average MTF interest rates of brokers have dropped from 18% to below 15% in the past month."The steady increase in retail participation, a sustained market rally, and lower interest rates have significantly contributed to the sharp growth in the MTF book over the past few months, even amid recent corrections," said Gourav Munjal, chief financial officer at 5Paisa Capital. "These factors have fostered a favourable environment for retail investors, driving higher leverage and more margin trading activity as investors are eager not to miss out on the rally."114408268In margin funding, investors buy stocks by paying up only part of the total value, while brokers fund the rest of the purchase and charge interest on the loan. For instance, if an investor buys a share worth ₹100 under the MTF facility, she would need to bring in only 20% of the transaction value or ₹20, while the remaining 80% or ₹80 is covered by the brokers. MTF is also collateralised by pledging investors' existing shares.Last year, the total MTF book was around ₹25,700 crore as of March 31, 2023, and about ₹7,100 crore in February 2020.The bigger appetite for this facility is from younger individuals, especially those who have entered the market after 2020.
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