India’s financial landscape is witnessing a strategic resurgence among its established brokerage houses, as they increasingly pivot towards margin trading facilities (MTF) to reclaim territory lost to agile digital rivals. For nearly a decade, the brokerage sector has been characterized by intense competition, with technology-driven discount brokers rapidly acquiring market share, particularly in high-volume derivatives segments. However, a significant counter-move is underway, centered on the provision of leveraged trading, a domain where traditional, often bank-backed, firms possess an intrinsic advantage: access to cheaper capital and robust balance sheets.
Margin Trading Facility, in essence, empowers investors to purchase equities by committing only a fraction of the total value upfront, with the remainder financed by the broker at an agreed interest rate. This mechanism, while amplifying potential returns, also inherently magnifies risks. Despite increasing market volatility, the MTF book in India experienced a substantial surge, growing by 42.9% in the year leading up to January 2026, reaching an impressive ₹1.20 lakh crore, as detailed in a recent Care Edge report. This growth underscores a deliberate strategic shift by legacy players to capitalize on their core strengths.
At the forefront of this leveraged lending segment are prominent bank-backed brokerages. Data from investor presentations by ICICI Bank and Kotak Mahindra Bank reveal that ICICI Securities Ltd and Kotak Securities Ltd collectively command 31.7% of the total MTF market share as of December. This concentration highlights a clear competitive edge for institutions with deep pockets and established lending frameworks. Dhiraj Relli, managing director and chief executive officer at HDFC Securities Ltd, articulated this strategy, noting, "In MTF, bank-based brokerages have a larger share when compared to the discount brokers. We lost on derivatives as discount brokers took that opportunity. On the MTF side, we took the opportunity." This sentiment reflects a conscious effort by traditional firms to carve out a profitable niche where their structural advantages are paramount.
The strategic emphasis on MTF is further underscored by its significant long-term growth potential within the Indian market. Ashish Nanda, chief business digital officer at Kotak Securities, pointed out that at approximately ₹1.2 trillion (around $13.2 billion), the MTF book represents only about 0.25% of India’s roughly $5 trillion equity market capitalization. This figure stands in stark contrast to more mature markets like China and the United States, where the leverage book typically ranges between 1.5% and 3% of total market capitalization. This substantial disparity suggests considerable headroom for expansion in India, driven by increasing financial literacy, growing market participation, and evolving investor sophistication. The lower penetration indicates that as the Indian market matures, the demand for sophisticated financial products like MTF is poised for sustained growth.
The context for this strategic pivot by traditional brokers lies in the dramatic disruption wrought by discount brokerages over the past decade. Firms like Groww, Zerodha, and Angel One rapidly ascended to prominence by offering flat-fee models, particularly attractive to high-frequency traders in the derivatives market. According to National Stock Exchange (NSE) data for January, Groww emerged as the country’s largest broker with a 28% market share and 12.5 million active clients, followed closely by Zerodha at 15.45% and Angel One at 15.2%. In stark contrast, traditional players like HDFC Securities held a 3.22% market share with 1.43 million clients, a modest increase from 2.8% in March 2023. Kotak Securities and ICICI Securities, at 3.1% and 4.6% respectively, have largely seen their market shares stagnate.
The success of digital brokers in the derivatives segment was largely fueled by their disruptive pricing model. While traditional brokers operated on a percentage-based commission structure—where a ₹1,00,000 trade might incur a ₹300 fee per side—discount brokers typically charge a flat fee, often as low as ₹20 per order, irrespective of the trade value. This model drastically reduced transaction costs for active traders, making derivatives trading more accessible and profitable for a broader base of retail investors. The boom in derivatives volumes allowed these digital platforms to generate sufficient revenue to maintain zero fees for long-term products like cash equities and mutual funds, further cementing their appeal. This was initially supported by stock exchanges rewarding brokers for high trading volumes, a practice that regulators discontinued in 2024 to foster a more equitable market environment.
Traditional brokers, with their legacy branch-led models and high fixed costs, found it challenging to adapt quickly to this paradigm shift. Amit Majumdar, group chief strategy officer at Angel One, highlighted this disparity, noting, "When you build a digital platform, the cost is taken only once, and the operating leverage allows you to provide flat brokerage because whether it is one customer or 100 customers, the cost of the platform does not go up." For established firms, a complete transition to a purely digital, flat-fee model would have meant disrupting their existing, often highly profitable, business structures, a difficult decision to make. This inertia created an opening that digital-first players exploited to great effect.
However, the MTF segment represents a different battleground where traditional brokers can leverage their inherent strengths. Their biggest advantage is the cost of capital. Being bank-backed or having substantial balance sheets allows them to borrow funds at significantly lower rates than their independent digital counterparts. This lower borrowing cost translates directly into more competitive interest rates for their MTF clients, making the product more attractive. Nanda of Kotak Securities emphasized this point, stating, "The biggest thing in MTF is the cost at which the customer borrows. The lower the cost of borrowing, the better the returns. So, if you borrow cheaper, your chances of making a return are higher." With MTF interest rates typically ranging from 2% to 18% across the industry, Kotak’s offering of 9.69%, and in some cases, monthly compounding rather than daily, significantly reduces the burden on clients, providing a clear competitive edge.
While access to cheaper capital is a potent weapon, discount brokers argue that leverage alone might not be a silver bullet for market share gains. Majumdar contended that "Access to capital by itself does not automatically translate into retail market share gains. MTF is not a standalone growth lever." He suggests that for the mass retail investor, factors such as platform experience, transparent pricing, and reliability often outweigh the mere availability of leverage. This perspective highlights the need for a holistic value proposition beyond just lending.
Echoing this sentiment, Roop Bhootra, whole-time director at Anand Rathi Share and Stock Brokers Ltd., believes that a standalone MTF offering, even with a lower yield, may not be maximally effective. He stressed the importance of combining MTF with quality research and advisory services. "Clients can only generate returns (after paying MTF interest) if they invest in quality stocks," Bhootra noted. "Perhaps a combination of quality research and a competitive MTF interest rate would create more value for clients." This suggests that traditional brokers, known for their research capabilities and personalized advisory services, could integrate MTF into a broader, more value-added offering, differentiating themselves from purely transactional digital platforms.
The renewed focus on MTF by India’s traditional brokers signals a mature adaptation strategy in a highly competitive market. Having ceded ground in the high-frequency derivatives space, these established players are now capitalizing on their foundational strengths – capital access, risk management expertise, and potentially, comprehensive client support – to dominate a segment that offers significant growth prospects. While the brokerage landscape will continue to evolve with technological advancements and shifting investor preferences, the strategic deployment of leveraged trading represents a powerful move by traditional firms to secure their relevance and drive growth in the dynamic Indian financial market. The battle for market share is far from over, but the lines are being redrawn, with capital leverage emerging as a key differentiator.
