How to take an MTF position on Zerodha

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The Margin Trading Facility on Zerodha allows investors to purchase eligible equity shares at a fraction of the total purchase price, with the balance funded by Zerodha as a short-term loan. The purchased shares serve as collateral for the loan and are held in the investor’s CDSL demat account in a pledged state. Interest accrues daily on the funded (borrowed) amount. MTF is a delivery product; shares are credited to the demat account after T+1 settlement and can be held for extended periods, subject to margin maintenance requirements.

For a conceptual overview of MTF, see MTF on Zerodha and MTF product code. For interest charges, see MTF interest and brokerage at Zerodha.

Regulatory framework

MTF is governed by SEBI Circular SEBI/HO/MIRSD/DOP/CIR/P/2019/33 (March 2019) and the subsequent SEBI master circular for stock brokers. The key regulatory parameters are:

  • Maximum funding ratio: The broker can fund up to 75% of the transaction value for Group 1 securities (leverage up to 4:1). Clients must contribute a minimum of 25%.
  • Eligible securities: Only SEBI-approved Group 1 securities are eligible. The Group 1 list is maintained by exchanges and covers broadly liquid, large-cap stocks, primarily Nifty 200 and BSE 200 constituents. Exchanges update the list periodically.
  • Maximum funding period: SEBI does not prescribe a mandatory closure date, but Zerodha may set its own maximum duration. Practically, positions can be held as long as the margin is maintained and interest is paid.
  • Broker net worth: Brokers offering MTF must maintain a minimum net worth of Rs 3 crore.
  • Disclosure: Brokers must disclose the MTF interest rate prominently on their website and in the account-opening agreement.

Step-by-step procedure

Verify that the stock is MTF-eligible

Search for the stock in Kite’s market-watch or search bar. Click the stock to open its market depth view, then click Buy to open the order form. In the order form, look at the product-type dropdown. The available options are CNC (delivery), MIS (intraday), and MTF (if the stock is eligible). If MTF does not appear in the dropdown, the stock is not on the SEBI Group 1 eligible list and cannot be purchased on MTF.

Group 1 eligibility is based on criteria including market capitalisation, liquidity (impact cost), and inclusion in exchange-defined indices. Nifty 50 and Nifty 200 stocks are generally eligible; most small-cap and micro-cap stocks are not. The exchange-published eligible securities list for MTF can be found on the NSE and BSE websites.

Open the order form and select MTF as the product type

With the order form open, click on the product-type dropdown and select MTF. The form changes to display MTF-specific fields:

  • Margin required: The minimum cash or collateral required from you (approximately 25% of total order value, adjusted for the specific security’s margin requirement as set by the exchange). Higher-volatility Group 1 stocks may require a higher margin percentage.
  • Funded amount: The amount Zerodha will lend you to complete the purchase.
  • Total purchase value: The full transaction value at the specified price and quantity.

Review these figures carefully. The funded amount is the principal on which daily MTF interest accrues.

Enter quantity and price

Enter the quantity of shares you want to buy. Set the order type:

  • Market: Executes at the best available price. For illiquid stocks or large quantities, market orders can result in unfavourable fills.
  • Limit: Executes only at or better than your specified price. Preferred for precise entry price control.
  • SL (Stop-Loss): Triggered when the price reaches a specified trigger, then becomes a limit or market order. Useful if you want to enter only after a breakout price is reached.

After entering the quantity and price, confirm the displayed Margin required against your available trading funds. Kite shows your available funds in the order form footer.

Confirm available funds cover the MTF margin

Open the Funds panel (top-right in Kite) and verify that Cash available or Total available (if you have pledged collateral) is at least equal to the MTF margin required for the order. If you have previously pledged equity shares, the collateral margin credit is available to meet the MTF margin requirement.

If funds are insufficient, add funds via Funds then Add funds or through an instant UPI transfer. Do not place the MTF order if the margin is not available; a rejected order does not result in a position, but an accepted order that later encounters a margin shortfall triggers a margin call.

Place the order and confirm execution

Click Buy to submit the MTF order. Kite displays the order in the Orders tab with a status of Open until it executes. On execution, the status changes to Completed.

After T+1 settlement (the next business day), the shares are credited to your demat account. In the Kite Holdings tab, the MTF position appears with a distinct indicator showing that the shares are pledged as MTF collateral. The holding is not free delivery; the shares cannot be transferred, gifted, or pledged again for F&O margin until the MTF loan is repaid.

Monitor daily interest accrual and margin requirement

After the position is open:

  1. Daily interest: Zerodha debits interest on the funded amount at approximately 0.04% per day. This appears in your Console ledger (navigate to Console then Reports then Ledger). Interest accrues every calendar day, including weekends and holidays, as long as the MTF position is open.

  2. Margin maintenance: The pledged shares serve as collateral for the MTF loan. If the market value of the shares falls, the collateral value decreases. If it falls below the required maintenance margin, Zerodha issues a margin call. You must top up the margin (by adding cash or pledging additional securities) or the position is liquidated.

  3. MTF position in Holdings: Navigate to Holdings in Kite to see the MTF position. The average cost shown is the MTF purchase price. The current market value reflects the live price. The pledged status is shown by the MTF lock icon.

What can go wrong

  • MTF not available for the stock. The stock is not in the Group 1 eligible list. Switch to CNC for delivery without leverage.
  • Margin call before anticipated holding period ends. The stock price fell far enough to breach the maintenance margin. Add cash to the trading account or accept the liquidation and compute the net loss including interest accrued.
  • Interest accumulates to a significant amount. MTF positions held for months can accumulate interest equal to or exceeding the principal gain on the stock. Review the break-even analysis periodically. See MTF interest and brokerage at Zerodha.
  • Corporate action complications. Dividends on MTF-held shares are credited to the demat but may be adjusted against the outstanding MTF balance. Bonus shares and rights issues on MTF-held shares are handled by Zerodha; contact support if corporate actions affect the collateral valuation.
  • Cannot place a sell order for MTF shares. MTF shares are in the Holdings tab, not the Positions tab. To close an MTF position (sell the shares), go to Holdings, find the MTF holding, and click Sell. Do not try to sell from the Positions or Watchlist with MIS product type.

References

  1. SEBI Circular SEBI/HO/MIRSD/DOP/CIR/P/2019/33, Review of the guidelines on Margin Trading Facility, 19 March 2019, https://www.sebi.gov.in/legal/circulars/mar-2019/review-of-the-guidelines-on-margin-trading-facility_42357.html.
  2. SEBI Master Circular for Stock Brokers, Chapter on Margin Trading Facility, SEBI/HO/MIRSD/2024.
  3. What is MTF (Margin Trading Facility)?, Zerodha Support Portal, https://support.zerodha.com/category/trading-and-markets/margin-leverage/mtf/articles/what-is-mtf.
  4. NSE Circular on Group 1 securities for MTF, NSE/MEM/series.
  5. Zerodha charges schedule, https://zerodha.com/charges/.

Conflict-of-interest disclosure: WebNotes Editorial Team has no financial relationship with Zerodha or any broker. This guide is produced for informational purposes only and does not constitute investment or financial advice. MTF involves significant leverage risk; consult a SEBI-registered investment adviser before using leveraged products.

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WebNotes Editorial Team

The WebNotes Editorial Team covers Indian capital markets, payments infrastructure and retail investor procedures. Every article is fact-checked against primary sources, principally SEBI circulars and master directions, NPCI specifications and the official support documentation published by the intermediary in question. Drafts go through a second-pair-of-eyes review and a separate compliance read before publication, and revisions are tracked against the SEBI and NPCI rule changes referenced in the methodology section.

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