Today, May 27th, 2024, the National Stock Exchange of India (NSE) has placed nine stocks on a ban list for trading in the Futures & Options (F&O) segment. This means these stocks cannot be bought or sold using derivative instruments like futures and options contracts. However, trading in these stocks will continue as usual in the cash market, where investors can directly buy and sell shares.
The NSE implements an F&O ban when the open interest (OI) for a particular stock crosses a specific threshold. Open interest refers to the total number of outstanding futures and options contracts that haven’t been squared off yet. Simply put, it reflects the amount of money committed by traders using these derivative instruments.
The NSE sets a market-wide position limit (MWPL) for each stock. If the open interest for a stock reaches 95% of this MWPL, trading in its F&O contracts gets suspended. This is done to prevent excessive speculation and volatility in the stock price.
Which stocks are on the ban list today?
The nine stocks banned from F&O trading today include:
- Bandhan Bank
- Biocon
- Gujarat Narmada Valley Fertilizers & Chemicals (GNFC)
- Hindustan Copper
- Vodafone Idea
- India Cements
- National Aluminium
- Piramal Enterprises
- Punjab National Bank (PNB)
If you already hold positions in the F&O contracts of these stocks, you will still be able to square them off (exit your positions) in the cash market. However, you won’t be able to initiate any new futures or options trades on these stocks until the ban is lifted.
The F&O ban on these nine stocks is unlikely to have a major impact on the overall stock market. It primarily affects traders who use futures and options contracts for their trading strategies. Investors who buy and sell shares directly in the cash market will not be affected by this ban.
What should investors do?
If you’re interested in trading any of these stocks, you can still do so in the cash market. However, it’s important to do your own research and understand the risks involved before making any investment decisions. You can also consider alternative stocks that are not on the F&O ban list.
Following the News
The NSE updates the F&O ban list daily. You can find this information on the NSE website or through financial news websites and apps. This will help you stay informed about any changes to the ban list and make informed investment decisions.