The National Stock Exchange (NSE) has added five stocks to its Futures and Options (F&O) ban list on November 14. This step was taken as these stocks crossed 95% of their market-wide position limit (MWPL) in the F&O segment. The stocks in the F&O ban today are Aarti Industries, Aditya Birla Fashion and Retail, GNFC (Gujarat Narmada Valley Fertilizers & Chemicals), Granules India, and Hindustan Copper.
The F&O ban list is used by the NSE to help reduce volatility and speculative trading in the market. When the total outstanding positions in F&O contracts for a stock go beyond 95% of the MWPL, it’s placed on the ban list. This limit helps control extreme price movements caused by heavy trading in these contracts.
Exceeding 95% of the MWPL indicates a high level of activity, and often, this is due to increased speculation. To avoid excessive risk, the NSE puts stocks in the F&O ban list to prevent further build-up of new positions in the futures and options market. However, stocks in the ban list are still available for regular trading in the cash market, where investors buy and sell shares at current market prices.
For investors holding these stocks, it’s wise to keep a close watch on price movements. Volatility in stocks on the F&O ban list may increase due to the limitations in the F&O segment. Consulting a financial advisor can be helpful in making well-informed decisions, as advisors can provide guidance on managing investments in stocks that experience high speculative activity.
The NSE updates the F&O ban list daily. A stock may be removed from the ban list if the positions in its F&O contracts reduce to acceptable levels. Investors and traders can stay informed about changes in the ban list by checking NSE’s daily announcements.
The F&O ban list is a measure used by the NSE to limit excessive speculation in stocks with high trading activity. This mechanism supports a more stable trading environment and protects investors from the risks of excessive speculation. Investors are advised to monitor the market closely and stay informed on changes in the F&O ban list, as frequent additions of a stock to this list may signal high volatility and risk.
