What is a Haircut and how does it impact the pledge margin?

What is a Haircut and how does it impact the pledge margin?

Haircut is the difference between the Market value of the securities and the value available after pledging such securities. Haircut is deducted to account for the uncertainties in the market.

For Instance, A client, Mr X, has 1000 Qty of Reliance shares in his holdings and wishes to pledge the same for additional margin to trade in F&O. The Market Price of each share is ₹2000 and the applicable haircut is 10%. So, the margin that Mr. X will receive is ₹18,00,000 (20,00,000 - 10%).

Find out the list of Mutual Funds and Approved Securities available for pledge and their applicable haircuts here!

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