Investors looking to trade futures and options (F&O) contracts for certain stocks on the National Stock Exchange (NSE) faced a surprise today. The NSE banned trading in F&O contracts for eight stocks, including Indus Towers, Punjab National Bank (PNB), and Steel Authority of India (SAIL).
But what does this mean for you, the regular investor? Let’s simplify it.
The NSE implements the F&O ban to cool things down when open interest for a stock crosses 95% of the “market-wide position limit” (MWPL). This is a safety measure to prevent excessive speculation and potential manipulation in the stock’s price.
This ban only applies to F&O contracts. You can still buy and sell shares of the eight listed companies in the regular “cash market” on the NSE.
- Which Stocks are on the Ban List Today?
The eight stocks on the NSE’s F&O ban list for today, June 25th, are:
- Balrampur Chini Mills
- Chambal Fertilisers and Chemicals
- GNFC
- Granules India
- Indus Towers
- Piramal Enterprises
- Punjab National Bank (PNB)
- Steel Authority of India (SAIL)
You’ll have to wait until the open interest for these stocks falls below 80% of the MWPL. The NSE updates the ban list daily, so you can check back tomorrow to see if the restrictions are lifted for any of these companies.
The F&O ban might impact the stock price in the short term, but it’s difficult to predict exactly how. Some traders might be discouraged by the lack of F&O options, leading to a temporary dip. However, the underlying fundamentals of the company will still be the main driver of its long-term stock price.
So, what should you remember?
This F&O ban is a temporary measure and may be lifted when the open interest reduces. Keep an eye on market updates to see when these stocks come off the ban list. In the meantime, you can still trade these companies’ shares in the cash market if you’re interested
