According to me, Intraday leverage provided, depends on the market capitalisation of the stock and hence is limited to a few stocks only. Stocks that have high trading volumes have higher exposure. The highest exposure is given to Nifty 50 stocks and Stocks trading in the F&O segment.
Moreover, there are also stocks where the liquidity is lesser and stocks which are highly volatile. The RMS (Risk Management System) validates these factors before deciding whether to give leverage or not.
Whenever a broker is allowing you to trade on leverage, he’s taking a risk, however small it may be. The risk factor associated with stocks isn’t the same across all stocks. There are stocks which are classified as ‘high risk’ against which no broker would want to give leverage which could spell disaster for his business.
The concept is fairly simple. When a Bank is granting loan, would it grant a loan to every Tom, Dick & Harry? No. The Bank would check for various factors and only on satisfying the various criteria laid down, you’d be approved for a loan.
To cite an example, let’s assume there are stocks X & Y and historically Stock “X” has known to be a “risky” stock. Classified as risky because its moving too much too soon. Assume Stock X is at Rs.100/- and has been gyrating between Rs.80 and Rs.120 in the last few days. If a broker is giving your 10 times leverage against Stock X, then you could buy 500 shares of Stock X @ Rs.95 with only Rs.4750 in your account. [500 shares @ 95 would cost 47500, since it 10X leveraged, margin required would be only 4750].
Assume the stock price fell from 95 to 82, a loss of Rs.13 would mean a loss of Rs.6500 in the client’s account while the client has a balance of only Rs.4750. If the client compensates by paying the difference its fine, else the broker loses his own money. Now assume there were 100 clients, who took such positions, the broker would be out of business!
The underlying is that all brokers have Risk managers who evaluate the risk associated with each stock before deciding whether to give leverage against it or not.