1 month, 1 week ago

What are the perils of using ‘buy now, pay later’ option for stock purchases

MUMBAI : ICICI Direct’s latest TV commercial on the “buy now, pay later" offer for stock purchases created a lot of chatter on the microblogging site X, formerly Twitter, about the potential risks of buying shares by borrowing money from a broker. The margin trading facility lets you buy shares with just a fraction of the cost upfront while your broker covers the rest and charges interest on the borrowed sum. The maximum funding an investor can borrow against a particular stock depends on the initial margin requirements laid down by the stock exchanges, per various Sebi circulars. For example, if the stock of XYZ Ltd. sees a sharp 40% fall in a single day, the investor's account would have a negative ledger balance, and the broker would require the investor to bring in additional margin immediately or sell pledged shares for the recovery. A fall in the value of pledged shares would also trigger additional margin requirements if it breaches minimum initial margin thresholds.

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Interest Stock Investors Brokers Facility Margin Buy Shares Var Broker Investor Initial Mtf Pledged Shares Other Costs

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