How does m.Stock’s Marginal Trading Facility (eMargin) benefit your trades?
The stock market is full of lucrative trading and investment opportunities. But the capital available with an investor is limited. So, investors, especially retail investors, might miss out on potential money-making opportunities. But not anymore. With m.Stock’s Margin Trading Facility (eMargin) all your funding woes will go away. What is m.Stock’s Margin Trading Facility and how does it benefit your trades? Let's find out.
What is Margin Trading Facility (eMargin) and how does it work?
Margin Trading Facility (MTF) or eMargin is an exchange-approved delivery funding product where the broker, in this case m.Stock, provides funding against available capital (known as margin) in your trading account. In exchange for this funding, the broker charges interest and the shares purchased are pledged with the broker for the duration of the trade. So, MTF essentially allows investors to undertake higher value positions with only a fraction of the total transaction value.
Let us understand how MTF works with an example. Say you want to buy 1,000 shares of ITC Ltd. currently trading at ₹387. To buy 1,000 shares you will need a capital of ₹3.87 lakhs. However, you only have ₹96,750 in your trading account. In a normal scenario you will not be able to take this position. But when you avail m.Stock’s eMargin facility, m.Stock will loan you the balance ₹2,90,250 required to place this trade.
With this you will be able to buy 1,000 shares of ITC ltd. worth ₹3.87 lakhs with just ₹96,750 in your trading account. This is how eMargin works and helps you boost your trading potential. In exchange for this funding, your broker i.e., m.Stock will charge interest on the funding value.
MTF interest rates in the industry can go as high as 24% p.a. But m.Stock’s eMargin interest rate starts as low as 6.99% p.a. for funding above ₹5 crore. The below table shows the three eMargin interest rate slabs charged by m.Stock basis funding value.
| Funding Value | Interest Charged (p.a.) |
|---|---|
| Above ₹5 crore | 6.99% |
| Above ₹25 lakhs and up to ₹5 crore | 7.99% |
| Up to ₹25 lakhs | 9.49% |
In the above example, since the funding amount is less than ₹25 lakhs, the interest charged will be 9.49% p.a. So, assuming you hold this position for 6 months, your eMargin interest will be ₹13,584 (₹2,90,250*9.49%*(180/365)).
How does MTF (eMargin) benefit your trades?
Apart from the obvious funding benefit, eMargin can help you multiply your gains. How? Let us relook at the above example of ITC Ltd. Assume that the stock price appreciates by 25% in the next 6 months. So, it goes from ₹387 to ₹483.75. In this case, the value of your investment will also grow to ₹4,83,750, generating a gain of ₹96,750. Even after accounting for interest, your net gain will be ₹83,166. Without eMargin you could have bought only 250 shares (on a capital of ₹96,750) and your gain would be restricted to ₹24,188. By using the eMargin facility, you made additional profit of ₹58,979 (₹96,750-₹13,584-₹24,187). So, with eMargin, your return on invested capital is 86% whereas without eMargin it is just 25%. This is the magic of the eMargin facility.
| With MTF | Without MTF | |
|---|---|---|
| ITC Ltd. purchase price | ₹387 | ₹387 |
| No of shares purchased | 1000 | 250 |
| Self-funding | ₹96,750 | ₹96,750 |
| m.Stock funding | ₹2,90,250 | ₹ 0 |
| Total trade value | ₹3,87,000 | ₹96,750 |
| Stock appreciation | 25% | 25% |
| Appreciated stock price | ₹483.75 | ₹483.75 |
| Total sale proceeds | ₹4,83,750 | ₹1,20,937.5 |
| eMargin interest | ₹13,584 | ₹ 0 |
| Net gains | ₹83,166 | ₹24,188 |
| Return on capital | 86% | 25% |
Why you should avail m.Stock’s eMargin facility
While multiple brokers offer MTF, m.Stock’s eMargin stands a cut above rest not just in terms of interest rate charged but also on the following parameters. Here is a comparison of what makes m.Stock's eMargin facility stand apart from others in the industry.
| Sr. No | Features | m.Stock | Industry |
|---|---|---|---|
| 1 | Interest Rate | One of the lowest interest rates starting at 6.99% for funding above ₹5 crore. Even the maximum interest charged is capped at as low as 9.49% p.a. for funding below ₹25 lakhs | MTF interest rates go as high as 18% - 24% p.a. |
| 2 | Funding (%) | You get up to 80% funding with m.Stock | The funding amount is restricted to 20-70% |
| 3 | No. of scrips | MTF facility is available for more than 700 stocks | MTF facility is available in 200-900 stocks |
| 4 | Holding Period | With m.Stock, there is no restriction on holding your eMargin position. You can hold your stocks for as long as you want | Most brokers restrict holding period to 365 days only |
| 5 | Subscription charges | There is no subscription charge. It is free for m.Stock Demat account holders | Subscription charges go as high as ₹10,000 - ₹20,000 |
| 6 | Pledging | m.Stock is India's first brokerage firm to introduce the concept of pre-pledging of stocks. This way you avoid the penalty incurred when you forget to pledge the stocks in required time | You get to post-pledge your stocks. You get the pledge authorisation link after you place your buy order. A lot of the time investors miss on the pledge request and are either required to pay the entire trade amount upfront or their position is squared-off, resulting in them missing out on lucrative opportunities |
| 7 | Pledge Charges | m.Stock charges low pledge and unpledge charges: ₹25 under the lifetime free AMC plan and ₹32 for the quarterly AMC plan | The average pledge charge can go as high as ₹29 per pledging request |
| 8 | Brokerage Charges | When you avail eMargin facility, no brokerage is levied on your eMargin trades | Typically brokers charge both brokerage as well as subscription fees, which increases the effective interest charged |
With so many stellar benefits, m.Stock’s eMargin facility can truly revolutionise your trading potential. So, stop waiting for a windfall or lottery to get adequate capital. Instead opt for m.Stock’s eMargin facility at lowest interest rates, starting at 6.99% across 700+ stocks.
