Contents
Definition
Intra-day trading (also called day trading) is the practice of opening and closing a position in the same security within the same trading session — both the buy and sell orders are executed on the same calendar date before market close (3:30 PM IST for equity on NSE/BSE). No shares are delivered to the buyer's demat account; instead, the net profit or loss is settled in cash on T+1. In India, intra-day trading is available in the equity cash segment, F&O segment (all positions are intra-day unless held to next session), and currency derivatives. The SEBI study released in July 2024 found that 89% of individual intra-day equity traders incurred net losses over FY22–FY24. Source: SEBI Study July 2024; Income Tax Act Section 43(5); SEBI Circular SEBI/HO/MRD1/MIRUM/P/CIR/2021/582 on margin framework.
How It Works Mechanically
To trade intra-day, a retail investor designates an order as "MIS" (Margin Intra-day Square-off) at the broker level. The broker may provide intra-day leverage above the base margin, because the position will be closed within the day, limiting overnight risk. For example, a ₹50,000 balance may allow buying ₹1,50,000–₹2,50,000 of shares intra-day under broker-specific leverage products.
SEBI's 2020–2021 margin circular tightened intra-day margins significantly. As of August 2021, SEBI requires all intra-day positions to be margined based on the exchange's VaR + ELM (Extreme Loss Margin) framework, with no special reduced-rate "intra-day leverage" allowed below this floor. SEBI's peak margin reporting requirement means intra-day positions must be margined at peak utilization during the day, not just at open or close.
Auto square-off: Brokers automatically close (square off) any open intra-day positions 15–30 minutes before market close (3:00–3:15 PM) if the client has not done so. The broker charges a square-off fee (₹20–₹50 per position) for auto-closure. Intra-day trades do not require full funds at order time — only the margin is needed. Cash settlement (net P&L) occurs on T+1.
Cost Components
- Brokerage: ₹20 per executed order flat (most discount brokers); no intra-day special rate typically.
- STT: 0.025% on sell side only for intra-day equity (significantly lower than 0.1%+0.1% delivery). This is the key STT differential for intra-day trades. (Finance Act 2023 rates.)
- Exchange charges: NSE ₹3.25/lakh turnover. Same as delivery.
- GST: 18% on brokerage + exchange charges.
- SEBI charges: ₹1/crore.
- Stamp duty: 0.003% on buy side (intra-day) vs. 0.015% for delivery.
- Auto square-off fee: ₹20–₹50 per position if broker auto-closes (broker-specific).
- Margin interest: If broker-provided leverage exceeds your cash, interest accrues (typically 0.05%/day for funded portion).
Risk / Protection Rules
- SEBI margin framework: Circular SEBI/HO/MRD1/MIRUM/P/CIR/2021/582 mandates peak margin reporting — intra-day positions must be margined at peak during the day, not just at open/close. Brokers must report each client's peak utilization to the exchange.
- No naked short in delivery: Intra-day short-selling is permitted; however, the short must be covered by end of trading (3:30 PM). Uncovered intra-day shorts after 3:30 PM become delivery shorts — which are prohibited and attract penalties.
- Price bands: Circuit filters apply equally to intra-day — a stock at upper circuit cannot be bought on margin intra-day.
- Leverage restriction: Post-August 2021 SEBI circular, maximum intra-day leverage is effectively 3–5× for most stocks (VaR-based). Pre-2021 leverage of 10–20× is no longer available from regulated brokers.
Worked Example
Investor E has ₹1,00,000 margin in her trading account. She places a MIS buy order for 100 shares of Bajaj Finance at ₹6,800 at 9:30 AM (total ₹6,80,000 — using broker's leveraged intra-day product). By 2:00 PM Bajaj Finance rises to ₹6,860. She sells 100 shares at ₹6,860. Gross P&L = (6,860 − 6,800) × 100 = ₹6,000. Costs: Brokerage ₹40, STT 0.025% × ₹6,86,000 (sell-side only) = ₹171.50, Exchange charges ~₹44, GST ~₹15, SEBI ~₹1, Stamp ₹20. Total costs ~₹292. Net P&L = ₹6,000 − ₹292 = ₹5,708. Tax treatment: entire ₹5,708 is speculative business income under Section 43(5) of the Income Tax Act, taxed at her applicable slab rate (not as capital gains). Speculative losses can only be offset against speculative gains for 4 years.
Caveats / Common Mistakes
- The SEBI July 2024 study found 89% of individual intra-day equity traders lose money, with an average annual loss of ₹1.1 lakh per loss-maker. This is a factual regulatory finding, not a projection.
- Intra-day profits are taxed as speculative income — not as capital gains. This means taxation at your applicable income-tax slab, often 30% for higher earners. This tax treatment significantly impacts actual after-tax returns.
- Leverage cuts both ways: a stock moving 2% against you on 6× leverage wipes 12% of your margin in one day.
- Auto square-off at 3:00–3:15 PM may happen at an unfavourable price — especially if many traders are squaring off simultaneously.
See Also
Primary Source
MintByte (ARN-314872 / APMI APRN-01658) provides this glossary for educational purposes only. Nothing here constitutes investment advice, a recommendation to buy or sell any security, or a guarantee of returns. Equity and derivatives trading involves risk of loss. Consult a SEBI-registered adviser before making investment decisions.