India’s growing appetite for buying shares with borrowed money is drawing attention as Margin Trading Facility (MTF) exposure reaches record levels.
Zerodha founder and CEO Nithin Kamath has raised concerns about the pace at which MTF is expanding. In Zerodha’s latest business update, Kamath said the brokerage’s MTF book had reached about ₹9,000 crore, with clients borrowing roughly ₹6,000 crore. He said leverage can appear attractive when markets are rising, but its risks become much more apparent when prices decline.
Industry-wide numbers underline the scale of the trend. India’s average MTF book reached a record ₹1.36 lakh crore in June 2026, up 57.6% year-on-year, according to CareEdge Ratings data reported by The Economic Times.
MTF allows investors to purchase shares by paying only part of the value themselves while borrowing the remainder from their broker. While this can amplify returns when a stock rises, it can equally magnify losses when the trade moves in the opposite direction.
Pushkar Raj Thakur Explains the Risk
In his video, Pushkar Raj Thakur explains the danger using a simple leveraged-trading example. An investor with ₹1 lakh could potentially take a much larger stock position through MTF. A relatively modest rise can therefore generate an outsized return on the investor’s original capital, but a significant fall can potentially wipe out that capital and trigger additional margin requirements.
Thakur describes MTF as effectively a double-edged sword, because the same leverage that multiplies profits can also multiply losses. He further highlights interest, brokerage, taxes and other charges associated with leveraged positions, meaning an investor’s true break-even point can be higher than the original purchase price.
One of the bigger concerns raised in the video is what could happen during a broad market correction. Thakur explains that falling share prices can generate margin calls. Investors unable to provide additional funds may then have their positions sold, creating forced selling. If this happens across thousands of leveraged accounts simultaneously, he argues, additional selling could push prices lower and potentially trigger further margin calls.
Kamath has raised a similar systemic concern. He has warned that liquidity in Indian equities can disappear rapidly during market declines and that forced liquidation of leveraged positions could become self-reinforcing, particularly in less-liquid stocks.
Small- and mid-cap stocks could be particularly vulnerable because lower liquidity can make it harder to exit large numbers of positions during periods of extreme volatility.
The warnings from Kamath and Thakur ultimately point towards the same principle: borrowing can increase an investor’s buying power, but it does not eliminate risk, it magnifies it.
For retail investors attracted by the possibility of generating larger returns with limited capital, understanding margin calls, borrowing costs and forced liquidation may be just as important as choosing the stock itself.