These days, the trend of leveraged trading, i.e. buying shares by borrowing, is increasing rapidly in the stock market. The special thing is that retail investors are also participating enthusiastically in this. Recent data from the National Stock Exchange (NSE) shows that retail investors are using this leveraged trading to place bets on many bluechip and midcap stocks. Let us know which are those top-10 shares which are being bought by retail investors with maximum margin funding? What is the logic behind this and is it a sign of some kind of increased risk?
First of all, let us understand what is leveraged trading or margin trading? Margin trading facility is a facility in which retail investors buy shares by borrowing money from the brokerage firm. Meaning the brokerage lends you money so that you can trade with a larger amount. In return you have to pay some interest and pledge the purchased shares. Typically investors get leverage up to 4 times their money. Meaning if you have Rs 1 lakh, you can buy shares worth maximum Rs 4 lakh.
This scheme of Margin Trading Facility (MTF) sounds quite good. If the market is in a boom, the profits can increase manifold… but if there is a decline, then the losses also increase equally rapidly. Sometimes the brokerage may ask for money by making a margin call. Not only this, if you do not pay the money on time, the brokerage can also sell your shares, no matter how much loss you are incurring. That means, the bigger the benefit, the bigger the risk.
Let us now know in which 10 stocks retail investors have currently invested the most money through margin trading-
The share of Hindustan Aeronautics (HAL) is at number one. When we last discussed top leveraged stocks in September, this defense stock was at the top in the list and this time too it is at the top. According to data till December 8, the value of leveraged position in HAL is Rs 1,677 crore. Strong orderbook in the defense sector and the wave of PSU theme have kept this stock in the news.
Jio Financial Services is at number two. According to the data till Monday 8 December, retail investors have taken leveraged positions worth Rs 1,399 crore in this share.
Mazagon Dock Shipbuilders is at number three. This is also a government company in the defense sector. This stock closed with a decline on 6 out of the last seven days. Despite this, retail investors have done huge margin trading in it. As of Monday 8 December, it had a total leveraged position of Rs 1200 crore.
Tata Group’s big retail company Trent is at number four. It is the parent company of Zudio and Westside. When we talked about leveraged stocks in September, this Tata Group company was not part of the top 10 list. But now this stock has come straight to the fourth position. However, as of Monday’s close, the leveraged position in the stock stood at Rs 1,107 crore.
Bharat Electronics Ltd (BEL) is in fifth place. This is also a defense sector PSU company, and retail investors have taken margin funding positions of Rs 1,042 crore in it. This stock has been showing continuous strength for the last few months.
Tata Motors PV is at number six, even though the company has been demerged, investors are still interested in it. This stock is at sixth place in the list of top leveraged stocks. According to NSE data, the value of these positions is Rs 1,022 crore.
IT sector giant Tata Consultancy Services (TCS) is at number seven.
The rank of this Tata Group company has declined compared to the month of September, but it still remains in the top-10 leveraged stocks. Retail investors have invested Rs 946 crore in this stock through margin trading facility.
Suzlon Energy is at number eight. Recently, there was a lot of movement in this stock due to brokerage reports and analyst day updates. The value of leveraged positions in this stock till Monday’s close was Rs 913 crore.
Yes Bank is at ninth place. Even though this stock falls in the low-priced category, the interest of retail investors in it is always high. As of Monday, the value of leveraged position in this stock was Rs 906 crore.
The last name in this list is Nazara Tech, where retail investors have taken leveraged positions worth Rs 901 crore. The growth story of gaming and digital entertainment has made it a retail favorite.
Now the question is, is this trend a matter of concern?
Retail investors are borrowing and investing money in stocks which are already in the high-flying segment. Like defence, PSU, IT and high-growth consumer stories. Leveraged trading works in favor of investors only when the market keeps rising… but when the market falls, it is these investors who get hurt the most. In such a situation, experts always advise to avoid such risky bets.
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