Pledging shares as margin to leverage investment

[meekinvestor]

Its ironical that many inexperienced investors invest when the market is on a high- they often invest too late. I can recall everybody investing in IREDA in 2024, when it was 284. IRFC was 217. Both in July, '24. If you observed that they appeared grossly inflated, they looked at you like you were being a wet blanked, to be politely ignored. Also, you could be told that IREDA and IRFC were different. Market had discovered them. Those were the heydays of PSU stocks.
In contrast, everybody is afraid these days. We invest when the market falls slightly. Then when it falls in a cascade, we lose the nerve. The abyss seems bottomless. Like the ad says, ‘dar sabko lagta hai, gala sabka sookhta hai’.
But when you see that L&T is down from 4418 on the 23rd Feb '26 to 3342 today, 23rd March, and then you read the statement of L&T management, “The company said over 95% of its project sites in West Asia are functioning normally. Only a small number of sites have been temporarily paused as a precaution, with no evacuation of personnel,” you are compelled to think something is awry. (Please also seehttps://www.business-standard.com/markets/news/larsen-toubro-falls-22-in-march-so-far-here-s-what-the-analyst-suggest-126032300287_1.html).
L&T is just an example. Of course, no recommendation. Bank nifty has fallen today. So has the pharma index.
If they have any connection with the Iran-US war, I am not aware.
So, yes, when aditya.lathe says, “Stocks can continue to trend downward for no reason, despite them being hugely undervalued even after a prolonged bear market,” he is being eminently sensible.
But then his observation would apply to all purchases during a bear phase, and not merely to buy on margin. As [Cshar] (Profile - Cshar - ValuePickr Forum) says,

@Cshar

“You buy shares in MTF or delivery, how the stock would know if you are holding asset in delivery or MTF?”

So, it seems to me that standing on the sidelines at a time like this goes against my instinct. Is there a fear of loss, yes. Only a few thousand more because I have bought by using my shares as margin.
I am grateful to all who helped me in my journey. I will surely share the results. We learn together. Often from differing sources. Equally often with different results.
The stocks mentioned are just examples. No recommendation for and against.
I am invested in L&T. Made after the recent fall.

[gsapte]

It is very common “to stay away from shares” when they are cheap and “feel interested” when shares are trading at high value. This is human behavior and it will remain so for long time.

There are many stocks now which are trading at much lower valuations after 1-2 years.

L&T has exposure to Middle East, and some portion of their Order Book is exposed to that region. What we need to analyze it, is it so big that, stock should correct from 4400 to 3300 yesterday. L&T Management is experienced and they have navigated many such Ups and Down in past 30+ years.

At 4400, Was the stock slightly overvalued ? Based on my analysis, it was slightly looking Risky at those valuations as they were above last 10 Year or 5 Year Median valuations (P/E, P/B, EV/EBITDA, MCap/Sales).

At 3300, it is much less risky as Valuations are now well below 5 Year Median. If an Investor is comfortable with current valuations, moderate position can be built (May be 25% to 50%) and continue holding. Downside could be there in short term but in long term I think, Upside could be more than Downside.

Same is True with Maruti, it has corrected from 17300 to 12300 yesterday. Look at its last 5 Year and 10 Year Valuations from all angles, read the news and you can decide whether it is less Risky now or not.

Eventually, during any war, all stocks correct irrespective of the impact of war on those businesses or not. When war slowly comes under control, Market adjusts the valuations to more meaningful levels. We have seen that happening in last 3 decades.

I am holding L&T, but have booked partial profit above 4200 and Now at 3300 or Below, it looks fairly valued to me hence views are biased.

[meekinvestor]

Is there a certain way to go about choice of stocks in margin investing?

[ChaitanyaC]

I think lesser volatility can be considered one criterion. Relatively predictable movement of price is better than volatility.

Even with fundamentally strong businesses, if price does not move, one absolute burden is the interest we pay each day. So, in addition to buying at a relative low, some idea about price movement is also important, I think. Not to mention, the role market environment plays.

Also, I think, it is better to build positions with time, instead of buying at once, if we are new. Because, a big fall can still happen even if we buy at a low price. So, the bigger the position, the higher will be the risk, if things don’t go as expected.

Investing as we all know is about businesses; MTF, I would say, is also about price as there are calculations involved.

I am also new to this. I am also experimenting due to limited availability of funds and numerous opportunities. I took a few trades in Titan. So, do take my views with a pinch of salt.

@Cshar Can you add anything more? Your previous posts were insightful.

[Cshar]

Staying with strong stocks is advisable in current markets though valuations in mid & small caps are quite compelling buys, buying small quantities and holding it longer is a better strategy. In momentum stocks ultra short with max two days is better. Will not advice building large position untill you can think of holding stock with a 40-50% fall. I have seen cheap stocks going dirt cheap currently hence taking a call based on PE looks myth.

Averaging with small quantities is best to get some surplus gains apart from PF. Current market texture has gone worst and we are still awaiting large IPO pipeline hence secondry market may remain muted. Dont go beyond 10% of PF as its very difficult to control your greed as capital looks easily available and downturn plays double sword with MTM loss and interest.

[Virat_Chhikara]

Hello everyone

I will give my story and my inputs on this topic. They might be of use.

Microfinance crisis happened. Stocks in this sector were cut in half. I liked one of the stocks Arman Financial and wanted to buy it. But I also liked the stocks which I was holding, they were good too, I didn’t wanna miss potential upside on them. I also did not want to pay capital gains taxes on my stocks that I held.

I got to know about Loan Against Securities. So in November 2024 I took a loan from Zerodha Capital against my shares.

I did not like the terms of the agreement. Zerodha only offered a 1 year loan back then.

I ended up getting sick of it and repaid my loan and finished it in January 2025. The stock was flat so I did not make any money there. But paid around 2 lakh in interest. Also paid some capital gains taxes.

Comes October of 2025, I was just browsing and lurking. I noticed that Zerodha was offering 3 year term loan now. So I was enticed and I took it.

This time I was smarter. I took only a manageable loan of 40 lakh. Earlier I started with 12 lakh but took more so eventually ended up taking 90 lakh. That was a lot. I was upto my eyeballs in debt. This was a major contributor to me getting sick of this loan taking.

I will repay most of this debt and its interest from dividends from my shares and new capital (savings).

The position was in the loss not only this year in march when the crisis happened but also in December of 2025. I ofcourse felt bad and regretted loan taking again. But I persisted. I had staying power this time and a much better state of mind. This week Arman went up a lot so I am happy with loan taking again.

I plan to hold my stocks for the long term. So not trading or anything like that.

One more thing. When march correction hit, luckily one stock which I held PFC was not down much. Don’t know why. I’m guessing the power sector is back in demand after nearly 2 years of dud.

So I sold some PFC and bought other stocks which I liked. I did not take any further loans because I would not be comfortable if the amount goes up.

Right now my loan outstanding is 12.5% of my total portfolio. I am very comfortable with this. I will repay most of this loan organically and will sell some stocks if needed when the loan term ends in late 2028.

Hope this was useful.

One very special nugget of wisdom that I really like goes something like this. Its from Morgan Housel book and originally from Naval Ravikant I believe.

You want to get rich in the 999 possible realities out of a 1000.

So I want my portfolio and wealth to be a fortress and be antifragile.

Be very careful with leverage.

[meekinvestor]

The most dangerous thing with pledging stocks is that if there is a sudden fall in the market, or a crisis in life, you can’t sell the shares till they are unpledged. That takes a day. So, you can’t put a stoploss too.
Like most investors, I have been starry eyed, inspired by stories of identifying a stock disproportionately cheaper, compared to its value. Looking at my portfolio, it hasn’t worked out as no stock in portfolio has remained with me continuously for more than a year. Both greed and fear have worked overtime. My greatest monetaroy loss has been in Kaynes technology. The Kotak Report came a day after I had bought it. I compounded my mistake by buying several times thinking now it had stabilised. And to think it was to be my multibagger.
Trendlyne gives ‘analyst target’. As per the forecasts stocks like Sona, Ather and TDPower had reached their targets. I sold them, only to realise my mistake the very next day.
This has happened because I failed to be either a proper investor or a trader. Still illiterate about charts, which seem to be indispensable for any trader. I would recommend Trade like a Stock Market Wizard by Mark Minervini (try Ocean books) for anybody who may not want to keep a stock for ever, and doesn’t want to trade it daily/weekly. I am reading that, but am still handicapped by my fear of the charts.
As for the buy on MTF, often timing, read luck, may play an important part. I started buying on MTF in mid-march and then my loan amount has balooned. So has the interest. Luckily, the unrealised profit on these shares is about 18 times the interest I have paid. So, as it happens, I start feeling like I have understood the market. Nothing of the sort.
The test will be if I can get out with substantial profits after timing my exit from the mtf-bought stocks at the right tim

[meekinvestor]

I have benefited a lot from others’ advice, so I am sharing updates on my journey with MTF. Till the market is in bull phase or even comparatively flat one may feel on top of the leverage, but a black swan event may make the back teeth jar, as the American novelists used to say. On the 12th I realised that I had to keep an eye on the portfolio all day to meet the demands for additional margin. Despite that portions of my shares in a particular stock got sold off. Today morning I got a nasty shock as one of my stocks had fallen by only a few rupess but the broker demanded ₹6.52 lakh as additional margin. I had to sell off the stock.
Till 3 days back my profit on leverage was 18 times the interest I had paid. Today it is less than 10 times. The profit is nearly half.
In normal cases I won’t worry about decline in my portfolio, but it is a different feeling when the shares you bought on borrowed money fall.

[ValueV]

@meekinvestor

I got a nasty shock as one of my stocks had fallen by only a few rupess but the broker demanded ₹6.52 lakh as additional margin

was there removal of that company from MTF funded stock list? I use this facility but I yet to experience serious drawdown in MTF funded position so I do not know if they can ask suddenly ask for full amount. How big position was for 6.52 lacs margin or you can tell in terms of %. thanks!

[meekinvestor]

In fact, as I mentioned, I was watching my portfolio from minute to minute. If I remember correctly, it was TD Power. I had 1000 of them. ICICIDirect sold 65 of them and the rest I sold when I saw that demand.
I have now reduced my MTF position to zero as my profit had been reduced to half mainly due to deline in the price of shares which had fantastic results but were victims of the market plays. I wanted to come out with profit instead of ending with only the interest outgo.

[ValueV]

Very strange! I do not see any major movement in share price of TD power. Unless you have utilized all margin limits - there should not be any requirement for margin suddenly (if you had very large position (>60-70 lacs) than 6 lacs would be small requirement. I am using MTF in Paytm Money and Upstox so I wanted to make sure I am not missing anything regarding this terms& conditions (ofcource if there large downside movement then I am expected to add additional margin). Thanks!

[meekinvestor]

I am not sure what happened. I couldn’t wait for clarity so got out of it. This is my first experience with MTF, and so many experieces which may be common-place, are new to me.
In fact, I got out of all MTF holding because I didn’t want more of interest mounting and share prices falling.

[Siddharth515]

Not sure if this is right thread .. but I am sharing what I am trying to do currently - till now was only investing in cash market and eventhough i was aware of pledge / margin/ cash collateral but never practiced it untill very recently.

I have pledged one of my MF holding and deposited some of the ideal cash in liquid case ETF .. giving me 3X margin that i am planning to deploy for long term trades. For trades - I am taking positions in leaps - kind of spreads with a range from 19500 to 27k till Dec 2026. Pay off graphs shows 70% probablity . If nifty remains in this range .. return by Oct-Dec may be around 3-4% per month dependig where the index is ..

So the aim is to recycle the funds which are parked in stocks and cycle it in comparatively safe trades where our risk is clearly defined.

If this is irrelevant and we dont want to talk on this.. simple delete the post.

Else, would like to understand the nuances on what has been done. - what is something that a common man will miss and challenges.

[meekinvestor]

Today’s example. I have bought Jay Bharat Maruti in MTF. The additional margin demanded is disproportionate. Selling it.

[meekinvestor]

I have 300 Wockhardt at 1986 average. Today’s price is higher at 2000. Yet, ICICIdirect is asking for ₹336,129.77 as margin.
I hope somebody can explain. Of course, if the demad persists through the day, I will square off.

[Tolaha]

Could it be that the shares you had originally pledged have reduced in price and so they are asking for additional pledge?

[meekinvestor]

When I wrote the post, they were higher than the buying price. My post mentions this. Now it is falling.
They have sent me an email:
Dear MUKESH CHATURVEDI,
This is to inform you that the Exchange has revised the Initial Margin requirement for WOCKHA from 42.64% to 99%. As a result, the Additional Required Margin on your existing position in this stock may increase. While your current position will continue with the existing margin, please note that if the stock price reaches its trigger level, the required margin will be recalculated based on the new, higher margin rate. We recommend reviewing your open positions and ensuring you have sufficient margin available to avoid any risk of margin shortfall.

[Mehul1]

Now it is down by 7%. Never touch hot stock, especially when you are buying on margin

[ValueV]

That explain margin shortfall as exchange has changed margin requirement for specific stocks..but i have never personally faced this situation. thanks!

Qty	Price	Total value	Margin from your
300	1986	595800	254049.12	Your initial margin Requirement
		total value*0.99	589842	After change from Exchange
			335792.88	shortfall

[meekinvestor]

Thanks, I am jotting down these experiences because it is my first time, and others may also learn from these instances.