Some stocks, including Gujarat Narmada Valley Fertilizers & Chemicals and Steel Authority of India, are temporarily restricted from a type of trading called F&O, which stands for Futures & Options. This means investors cannot buy or sell contracts based on these stocks’ future prices for a short period.
This restriction happens to control market risks. F&O trading involves a lot of speculation on stock prices, and sometimes, this speculation can get too high. The National Stock Exchange (NSE) monitors a measure called Open Interest (OI) to gauge this speculation level.
What Does This Mean for Investors?
If you hold shares of these companies, you can still buy and sell them in the regular cash market. The ban only affects F&O contracts. Stock prices might be impacted slightly due to the ban, but this is usually temporary.
As of today, July 24, 2024, the exact list of banned stocks can change daily. However, Gujarat Narmada Valley Fertilizers & Chemicals and Steel Authority of India are likely to be on the list based on recent reports. Other companies might be included or excluded depending on their OI levels.
What Happens Next?
The F&O ban will be lifted once the Open Interest for these stocks falls below 80% of the MWPL. This indicates a decrease in speculation, making F&O trading less risky. The NSE updates the F&O ban list daily, so investors can check the exchange’s website for the latest information.
An F&O ban is a normal market mechanism to control risk. It doesn’t necessarily mean a company is doing poorly. Investors should focus on the company’s fundamentals and long-term prospects rather than getting worried about short-term F&O restrictions.
The National Stock Exchange website provides a wealth of information on F&O trading and the ban list. Financial news websites and apps also update this information regularly. Remember, consulting with a financial advisor is always recommended before making any investment decisions.
