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Benefits of Equity Funding

Table of content

Equity funding

The stock market is an ocean of opportunities. There are many instances when traders spot a great trading opportunity but cannot make the most out of it due to limited trading capital. However, investors can now fill this gap using an exchanged-approved funding product - Margin Trading Facility (MTF).

MTF is broker-sponsored financial assistance that enables you to buy stocks valued up to 4 times more than your available account balance. This facility can be conveniently accessed at a nominal interest rate in return for the leverage. MTF is a powerful tool that enables you to make the most out of short-term trading opportunities in the equity segment.

In this article, we will try to understand equity funding better, by diving into its intricacies and also discuss some key factors that you should consider while using MTF. So, let’s get started.

Advantages of Equity Funding

If used prudently, the following characteristics of equity funding can be beneficial for you in the following ways:

  • Higher percentage return:

    Availing up to 4x leverage puts you in a position to earn higher returns on capital employed.
  • Low-cost financing:

    The equity margin trading facility involves paying interest on the funding amount. The higher the interest, the lower your take home profit. Hence it is advisable to look for low-cost funding like the one offered by m.Stock. With m.Stock’s MTF (eMargin) you can avail up to 80% funding at one of the lowest interest rates of 7.99%.
  • No liquidity gap:

    You no longer have to miss out on lucrative short-term trading opportunities due to lack of capital. With an equity funding facility, you can cash in on stock market opportunities with ease.
  • Enhanced buying power:

    While you pay about 20% of the trade value, the broker (m.Stock) pays the balance of up to 80% as a margin. This enhances your buying capacity by up to 4 times.

Key factors to be considered while availing equity financing via MTF

While the benefits of equity funding persist, there are a few key elements that you must take note of before putting it to use. These are as follows:

  • Pledging the stocks:

    The stocks purchased under MTF are mandatorily required to be pledged as per the regulatory guidelines. With m.Stock, you enjoy the benefit of pre-pledging the shares before placing the order.
  • Exclusively available for the equity segment:

    It is important to note that the leverage position can be created using margin funding only in the case of equity delivery shares. The funds cannot be used for creating trades under the derivatives segment.
  • Holding period:

    Most brokers in India have a holding period limit of up to 1 year on the stocks purchased via MTF. However, with m.Stock, you can hold your position for an unlimited period.

At m.Stock, you can take advantage of the margin trading facility (eMargin) that offers up to 80% margin funding on 700+ stocks at the lowest interest rate of 7.99%. So open a zero brokerage account and trade big without paying big or any brokerage charges.

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