Margin Against Shares In Demat Account - Its Working Process

Active traders gradually increase their investing abilities and risk appetite and consider margin trades to take advantage of opportunities available in the equity market. Margin trading allows traders to invest in large quantities of stocks to make a considerable profit. For example, a 5% return on margin trade of 5 lakhs is Rs. 25,000. You may need to invest just 50% of the trade value, and the rest the broker will bear. It is the return on your investment of Rs. 2.5 lakh and not 5 lakhs.  

In the share market, the SEBI allows traders to collateralize their demat securities to use the margin trading facility (MTF) with the stockbroker. Margin against shares is like a loan against your shares offered at an agreed interest rate. The cost of margin trades includes demat pledge/unpledged charges also. It is an additional charge besides interest costs.

You can use the margin for as long as you want. Few stock brokers offer margin for as long as 365 days. The trader continues to be the owner of the collateralized shares. When you square off the position, the proceedings will be credited to the broker's account to adjust the loan costs against the margin amount.


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