Are you interested in exploring the world of stock trading in India? It is brimming with opportunities, some of which need quick action. What matters is how fast you can make a wise investment choice. But what if you run short of funds? No need to worry. Margin Trading Facility (MTF) will help you find a solution. Whether you are freshly introduced to the market or an experienced member trying to make your capital work, understanding this facility can act as a stepping stone.
In the following blog, you will find all information regarding MTF, its working pattern, and a step-by-step guide on how to activate this in your Demat account, focusing on Kotak Neo and Kotak Securities.
Meaning of MTF
It is a unique facility, provided mainly by the stockbrokers. They make room for the investors to buy stocks beyond their means. To be precise, this process lets you borrow money from your broker for trading in the stock market. You will have to pay just a fraction. The broker will take care of the remaining payment. In return, you will have to deposit your existing securities as collateral. However, this margin trading funding comes with an interest cost. It is calculated based on the duration you take to repay the borrowed amount.
What is Meant by a Demat Account?
A dematerialised account is known as a Demat account in short. It is a type of electronic account, where your assets, such as shares, securities, stocks, bonds, and mutual funds, are stored in digital format. This is quite popular nowadays as it almost eliminates the need for physical certificates. If you buy or sell any shares, it will be reflected here, making your trading process secure. Naturally, there remains almost no risk of digital theft. In the present scenario, opening such an account is essential to trade in the Indian stock market.
Why Must You Activate MTF in Your Demat Account?
There are several compelling reasons for this. For example,
- It increases your trading capacity. If your funds are limited, naturally, you will hesitate to avail yourself of fruitful opportunities. MTF gives you the required capability to seize the opportunity.
- Once your trades are successful, you will enjoy a high profit margin. So, by allowing you to take this opportunity, MTF makes you a gainer.
- There may be short-term price fluctuations often occurring in the market. This facility helps you take advantage of those movements to potentially earn profits.
- You can also buy securities with this facility by making partial payments. The rest you can pay later with interest.
What You Need to Activate MTF
There are some essential requirements that you will need to fulfil to get the benefits.
- You must have an authenticated and functional Demat and trading account.
- Certain brokers have some criteria that you will have to meet. For that, you may need to prove your creditworthiness and show your trading profile to them.
- According to the new regulations levied by SEBI, pledging of shares is mandatory to avail such funding.
- You will have to agree to the terms and conditions set by your broker.
How Does Margin Trading Facility Function?
- Not all stocks are eligible for margin trading. Only your broker, like Kotak Neo, will make you aware of the approved ones. You make a selection accordingly.
- When you buy an order, select ‘MTF’ as your product type.
- Pay only a small percentage of the order value. Your broker will take care of the remaining amount.
- By rule, you will have to pledge the purchased shares.
- You will have to pay a daily or monthly interest on the amount you borrowed, in addition to other applicable fees.
Step-By-Step Process of Activating MTF in Your Demat Account with Kotak Neo and Kotak Securities
- Make sure you have a Kotak Demat Account. If you have not purchased Kotak Securities yet, you will need to open a Demat account. For this, you can use the Kotak Neo app or go to their website.
- You must be able to find the MTF activation section. First, log in to your Kotak Securities or Kotak Neo trading platform. Then click on ‘Account Details’ and look for the ‘Products’ section. Select the ‘Margin Trading Facility’ option.
- Then activate the facility by clicking on the ‘Activate’ button. A prompt may appear for you to accept a disclaimer and some official regulatory documents. Additional documentation may not be required for many users.
- After activation, start placing MTF orders. Go to the buy order page and select MTF as the order type. Then confirm the order by selecting the quantity and price. The margin requirements and pledging will be handled by the system automatically.
- Once you buy the stocks, you will receive a pledge link from NSDL or CDSL. It will depend on your depository participant. Click on the link, authenticate it with OTP, and pledge your stocks. Be careful. Complete the pledge within the given time.
Recommended Approaches for Using MTF
- Always be aware of your limits and clearly understand your risk tolerance.
- Keep a track of eligible stocks and the margin requirements regularly; if possible, daily.
- Make sure you have extra funds available. Otherwise, you may have to forcibly sell your assets.
- Such facilities are best for short or medium-term trading, where you are confident about high profit margins.
- Take the help of broker tools. Use calculators and other assistance provided by Kotak Neo or Kotak Securities to know the interest cost.
Why Must You Choose Kotak Neo and Kotak Securities for Margin Trading?
Kotak is an organisation well known for its transparent processes. Their trading platforms, such as Kotak Neo and Kotak Securities, not only offer competitive rates but also user-friendly interfaces. They have made proper use of modern technology, giving rise to innovative tools, reducing the complexity of availing MTF. With multiple eligible stocks and dedicated support, the company offers a strong base for your margin trading journey.
Final Thoughts
It is pretty clear by now that MTF is undoubtedly the best option for stock market enthusiasts. You can make the most out of high-potential opportunities even when your pocket is tight. What you need is only a precise and disciplined approach. If you want a good user experience, there can be no better option than Kotak Neo and Kotak Securities. Their simple activation process, competitive rates, and timely support make them the best choice for almost all potential investors.
Note to readers: This article is part of Mint’s paid consumer connect Initiative. Mint assumes no editorial involvement or responsibility for errors, omissions, or content accuracy.
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