Margin trading hits ₹1 trillion. The hidden risks in your stock investment plan

₹1 trillion, highlighting a surge in leveraged stock buying even as risks loom large for retail investors.Data from the National Stock Exchange shows total outstanding funded stock positions across brokers have surpassed ₹1 trillion, reflecting how aggressively investors have embraced leveraged stock buying in recent years.The pitch is tempting: put in a fraction of the money, borrow the rest from your broker, and take a larger position in a stock you are bullish on. But the mechanics of margin trading facilities (MTF) carry risks that are easy to underestimate.MTF lets investors buy stocks by paying only part of the total transaction value upfront.

Brokers fund the rest and charge interest on the borrowed amount, typically calculated daily.The upfront portion, called the initial margin, can be met with cash or by pledging shares already held in a demat account. The broker then credits the balance required to complete the purchase.

Investors effectively own the shares, but the position carries an interest cost for as long as it is held.Not every stock is eligible. Only securities classified as Group I by the exchanges—around 1,000 currently—can be bought or pledged under MTF.

These are liquid stocks that have traded on at least 80% of days in the past six months. Maximum lending varies by investor, stock, and broker risk policies.

Access requires explicit opt-in through a broker’s platform.The Scurities and Exchange Board of India's rules require investors to provide 25-50% of the total purchase value as the initial margin, yielding 2-4x leverage. So, for a ₹1 lakh position, an investor contributes ₹25,000- ₹50,000, with the broker funding the rest.Interest rates on the borrowed amount range from 9% to 18% per annum,