When markets have been flat for two years, the temptation is to “do something”. Some investors take a personal loan to buy more units at lower prices. Others use their broker’s margin facility, pledge their portfolio for a loan, or move into futures and options hoping to recover faster. We are a lender, and we are saying plainly: these are among the riskiest things you can do in a flat market. This post shows why, with numbers. It is part of our guide to investing in a flat market.
This is general information, not investment advice. Consider a SEBI-registered investment adviser for personal advice.
How leverage works, in one example
An illustrative example, not a real customer. Priya has ₹1,00,000 of her own savings. She borrows another ₹1,00,000 at an assumed 14% a year, invests the full ₹2,00,000 in an equity fund, and plans to sell after one year to repay the loan. To keep the maths simple, we assume the loan is repaid in one go at the end with ₹14,000 of interest.
| Market return over the year | Without a loan (₹1 lakh invested) | With a loan (₹2 lakh invested, ₹14,000 interest) |
|---|---|---|
| −20% | ₹80,000 (−20%) | ₹46,000 (−54%) |
| −10% | ₹90,000 (−10%) | ₹66,000 (−34%) |
| 0% (flat market) | ₹1,00,000 (0%) | ₹86,000 (−14%) |
| +10% | ₹1,10,000 (+10%) | ₹1,06,000 (+6%) |
| +20% | ₹1,20,000 (+20%) | ₹1,26,000 (+26%) |
Illustrative. Figures show what Priya keeps after repaying the ₹1,00,000 loan and ₹14,000 interest. Ignores taxes, fees and exit loads. 14% is an assumption for the example, not any lender’s rate. Market returns are scenarios, not forecasts.
Your return on your own ₹1 lakh: with and without a loan
Same illustrative assumptions as the table above. Bar lengths are proportional (1.6px per percentage point).
Look at the asymmetry. To earn 6 extra percentage points in a good year, Priya risks losing 34 extra in a bad one, and in a flat year, the kind we have had, she loses 14% while an unborrowed investor loses nothing. The loan’s cost is certain; the market’s return is not.
In a flat market, borrowed money has one guaranteed outcome: the interest bill.
The four ways people borrow to invest
Personal loan or credit card
Unsecured money used to buy shares or funds. You pay a fixed EMI whatever the market does. If prices fall, you owe the full loan on a smaller portfolio. Omozing personal loans are meant for genuine personal needs, not for investing or trading.
Margin trading facility (MTF)
Your broker funds part of a share purchase and charges interest daily for as long as you hold. If prices fall, you must add money or the broker can sell your shares, often at the worst time.
Loan against your portfolio
Pledging funds or shares to borrow and buy more. A fall hits you twice: the portfolio shrinks and the lender may make a margin call or sell pledged units.
Futures and options
Built-in leverage: a small margin controls a large position. Losses can exceed what you put in, and most retail traders lose money (see below).
What SEBI’s studies found about F&O traders
SEBI, the market regulator, has studied individual traders in equity futures and options. Its findings are among the clearest warnings any regulator has published:
The FY22–FY24 study, published in September 2024, found that the average loss-maker lost about ₹2 lakh including transaction costs, and only about 1% of individual traders made a profit of more than ₹1 lakh after costs. The follow-up study for FY25, released in July 2025, found net losses of individual traders rose 41% from ₹74,812 crore in FY24, with an average net loss of about ₹1.1 lakh per trader.
These numbers matter most in a flat market, because that is when F&O looks like a shortcut. It is not. Most people who use it to “recover” equity losses add new losses on top.
Already borrowed to invest or trade? What to do now
Stop adding leverage
No new loans, no new margin positions, no averaging down with borrowed money. The first job is to stop the hole getting deeper.
List every debt and its true cost
Loan, lender, outstanding, rate, EMI or daily interest. Margin funding and app loans that charge daily often cost far more than they appear to.
Compare the debt cost with a realistic return
If you are paying more in interest than your investments can reasonably be expected to earn, reducing the debt is usually the safer move, even if it means booking a loss. A realised loss can at least be set off against capital gains for tax.
Replace costly debt with one manageable EMI
If short-term loan-app debt is part of the picture, SmartSwitch consolidates several app loans into one Omozing loan and one EMI, credited to your own account so you close each app loan yourself.
Get personal advice
For investment decisions, speak to a SEBI-registered investment adviser. Be wary of anyone on social media offering to “recover” trading losses for a fee.
The right order of money
Paying off a loan that costs 1% a day is a guaranteed return no investment offers. We compare the two in pay off debt or invest? If your debts are under control and you want to understand where your portfolio stands, see what the Nifty’s two-year time correction means and whether to pause your SIP.
Carrying several app loans?
Every rupee spent on rollover fees is a rupee that could have been saved or invested. See what one Omozing EMI would look like instead.
Frequently asked questions
Is it a good idea to take a personal loan to invest in the stock market?
It is risky. The loan has a fixed cost every month, while market returns are uncertain. In a flat or falling market you lose money on the interest alone. Use loans only for genuine needs.
What is margin trading and why is it risky?
Under a margin trading facility, your broker funds part of a share purchase and charges interest while you hold. If prices fall, you must add money or the broker can sell your shares, which can lock in losses at the worst time.
How many F&O traders lose money in India?
SEBI found that 93% of over 1 crore individual traders in equity F&O made losses between FY22 and FY24, with aggregate losses above ₹1.8 lakh crore. Its FY25 study found about 91% made losses, with net losses of ₹1,05,603 crore.
Can I trade F&O to recover my mutual fund losses?
SEBI’s data suggest most individual traders lose money in F&O, so it is far more likely to add losses than recover them. Speak to a SEBI-registered adviser before taking leveraged positions.
I borrowed to invest and the market is down. What should I do?
Stop adding leverage, list your debts and their true cost, and compare that cost with a realistic return. Reducing expensive debt is often safer even if it means booking a loss, which can be set off against capital gains.
Is it better to pay off debt or invest?
High-cost debt such as loan apps and unpaid card balances should usually be cleared first, because the interest you save is certain while investment returns are not.
Sources (as of 22 October 2026): SEBI press release, “Updated SEBI study reveals 93% of individual traders incurred losses in equity F&O between FY22 and FY24” (September 2024, sebi.gov.in) and reporting of its detail by Outlook Money; SEBI FY25 study as reported by Business Standard and Value Research (July 2025). Leverage figures are illustrative calculations. Check the official source before acting.
Omozing is the digital lending brand of Aparampaar Finance Private Limited, an RBI-registered non-deposit-taking NBFC. We do not offer investment products or advice. This is general information, not investment advice; consider a SEBI-registered investment adviser for personal advice. See our regulatory disclosures and grievance redressal process.