On Friday, September 6, the National Stock Exchange (NSE) of India placed seven stocks under the futures and options (F&O) ban list. These stocks are restricted from trading in the F&O segment because they exceeded 95% of the market-wide position limit (MWPL).
The MWPL (Maximum Allowed Open Positions Limit) defines the highest number of open futures and options contracts permitted for a stock. When this limit crosses 95%, the stock is placed under the F&O ban. This is done to prevent excessive speculation in these stocks and to help maintain market stability.
Stocks in the Ban List
The seven stocks currently in the F&O ban list are:
- Aditya Birla Fashion & Retail
- Balrampur Chini Mills
- Bandhan Bank
- Biocon
- Chambal Fertilisers and Chemicals
- Hindustan Copper
- RBL Bank
These stocks remain available for trading in the cash market, meaning investors can still buy and sell these stocks in the regular market.
Impact on Investors
When a stock is placed under the F&O ban, no new positions are allowed in the futures and options contracts of that stock. Investors who already have open positions can either reduce them or hold onto them but cannot increase their exposure. The idea is to limit further speculation in these stocks until the overall positions fall below the 95% MWPL threshold.
While this may sound like a restriction, it is actually a safeguard for the market. By limiting the number of contracts in heavily traded stocks, the NSE aims to reduce the risk of market volatility and protect investors from potential losses due to rapid price movements.
The NSE updates its list of stocks in the F&O ban every day based on the market-wide position limits. Therefore, it’s essential for traders and investors to stay informed about these changes.
The inclusion of stocks in the F&O ban list is a common practice aimed at maintaining a balanced and stable market environment. By limiting the positions in certain stocks, the NSE aims to control excessive speculation and ensure that the market operates smoothly. Investors should remain aware of the ban list and understand how it might affect their trading or investment decisions. For now, Aditya Birla Fashion & Retail, Balrampur Chini Mills, Bandhan Bank, Biocon, Chambal Fertilisers and Chemicals, Hindustan Copper, and RBL Bank are under the ban period in the futures and options segment, but they remain available for trading in the cash market.
