The NSE has temporarily restricted trading in the futures and options (F&O) segment for eight stocks today, July 18th, 2024. This includes Vedanta, Piramal Enterprises, RBL Bank, among others. While trading isn’t entirely halted, specific trading activities are limited.
The NSE restricts trading in the F&O segment for a stock when there’s a lot of activity in that stock’s futures and options contracts. This is measured by something called “market-wide position limit” (MWPL). If trading activity gets too high, exceeding 95% of the MWPL, the exchange puts a temporary hold on things to cool things down.
Investors can still buy and sell shares of these eight stocks in the regular “cash market” portion of the exchange. However, they cannot open any new futures or options contracts for these stocks during the hold period. Existing futures and options contracts can still be adjusted or closed out, but no new positions can be created.
The eight stocks currently on the NSE’s F&O ban list for July 18th are:
- Balrampur Chini Mills
- Chambal Fertilisers and Chemicals
- GMR Infra
- GNFC (Gujarat Narmada Valley Fertilizers and Chemicals)
- Hindustan Copper
- Piramal Enterprises
- RBL Bank
- Vedanta
A lot of activity in a stock’s F&O segment can indicate a few things. There could be high volatility (meaning the stock price is fluctuating a lot), or there could be a lot of speculation about the stock’s future performance. The NSE’s F&O ban is a way to manage this activity and prevent potential instability in the market.
Overall, this temporary hold on F&O trading is a normal mechanism used by the NSE to maintain order in the market. Investors can still trade these stocks in the cash market, and the hold will likely be lifted once trading activity cools down.