Indian Stock Exchange (NSE) has placed trading restrictions on eleven stocks, including Bandhan Bank, IEX (Indian Energy Exchange), Punjab National Bank (PNB), and Zee Entertainment (ZEEL). These stocks are barred from being traded in the Futures & Options (F&O) segment for today, May 24th, 2024.
Why the Ban?
The NSE implements these restrictions to control excessive risk in the market. The F&O segment allows traders to buy or sell contracts based on the future price of a stock. When there’s too much activity in a particular stock’s F&O segment, it can lead to high volatility and potential for manipulation.
The ban is triggered when a stock’s “open interest” surpasses a specific limit set by the exchange. Open interest represents the total number of outstanding futures and options contracts that haven’t been settled yet. If this number crosses 95% of the exchange-defined limit, trading in F&O contracts for that stock gets halted.
What Does This Mean for Investors?
While these eleven stocks cannot be traded in the F&O segment today, they are still available for trading in the regular “cash market”. This means investors can still buy or sell shares of these companies like usual. The ban only affects those who specifically trade in stock futures and options contracts.
Here’s a breakdown of what’s happening:
- F&O Trading Halted: Investors cannot open new positions (buy or sell new contracts) for Bandhan Bank, IEX, PNB, ZEEL, and the other seven listed stocks in the F&O segment today.
- Cash Market Open: Regular buying and selling of shares of these companies continues as usual in the cash market.
- Temporary Ban: The F&O ban is temporary and will be lifted once the open interest reduces below 80% of the exchange-set limit.
Who are the Other Affected Stocks?
Along with the four mentioned earlier, the other companies placed under the F&O ban today include:
- Aditya Birla Capital
- Balrampur Chini Mills
- Hindustan Copper
- India Cements
- Metropolis Healthcare
- National Aluminium Company (NALCO)
- Piramal Enterprises
Final Thoughts
The F&O ban is a mechanism to ensure market stability. While it may cause inconvenience for some traders, it ultimately protects investors from excessive volatility and potential manipulation.