Today, September 11, 2024, the National Stock Exchange (NSE) of India announced a ban on trading for seven stocks in the Futures and Options (F&O) segment. This decision affects stocks that have exceeded 95% of their Market-Wide Position Limit (MWPL). The stocks placed on the ban list include:
- Aditya Birla Fashion & Retail
- Balrampur Chini Mills
- Bandhan Bank
- Biocon
- Chambal Fertilisers and Chemicals
- Hindustan Copper
- RBL Bank
The NSE monitors all stocks traded in the futures and options segment to ensure that trading remains fair and orderly. A stock is added to the F&O ban list when the combined open interest (total number of outstanding contracts) in that stock exceeds 95% of the allowed market-wide position limit. The market-wide position limit is the maximum number of contracts that can be open for a particular stock at any given time.
When a stock crosses this limit, it raises concerns about excessive trading activity, which could lead to increased volatility and risk in the market. The NSE’s decision to ban these seven stocks is meant to protect investors from potential market disruptions.
For investors, the F&O ban means that they cannot take any new positions in futures or options contracts of the affected stocks. However, they are still allowed to close or reduce their existing positions. If an investor already holds a contract in any of the banned stocks, they should be cautious, as the stock’s price could experience more volatility during the ban period.
The ban does not affect the trading of these stocks in the cash market. Investors can continue to buy or sell shares of these companies in the regular stock market. However, they must understand the risks involved, especially if the stock’s price is fluctuating due to high trading volumes.
However, if the open interest remains above the 95% threshold, the ban will continue until the levels reduce to a more manageable figure. The NSE takes this measure to ensure that the market remains stable and fair for all participants.
The inclusion of these seven stocks in the F&O ban list is a significant move by the NSE to maintain market stability and protect investors. While the ban may limit some trading activities, it is an important step to prevent excessive speculation and reduce risks in the market. Investors should remain cautious and stay updated on any changes to the ban list, as these changes could affect their trading strategies.