NSE Put These Three Stocks Under F&O Ban on March 7, 2024

On March 07, 2024, the National Stock Exchange of India (NSE) placed Manappuram Finance Ltd, Mahanagar Gas Ltd, and Zee Entertainment Enterprises Ltd (ZEEL) under the Futures & Options (F&O) ban list. NSE stated that the securities had been placed under ban as they crossed 95% of the market-wide position limit (MWPL). The ban indicates that no fresh positions are allowed for any of the F&O contracts in the particular stock when placed under the F&O ban period by the stock exchanges. However, investors and traders can buy stocks in the cash market.

NSE informed that all clients/members should trade in the derivative contracts of said security only to decrease their positions through offsetting positions. Any increase in open positions shall attract appropriate penal and disciplinary action.

About Manappuram Finance Ltd

Manappuram Finance is a Non-Banking Finance Company (NBFC), which provides a wide range of fund-based and fee-based services, including gold loans, money exchange facilities, etc. The company operates a diversified product stream from a pure gold lending company to a more diversified financial company.

About Mahanagar Gas Limited

Mahanagar Gas Ltd is engaged in the business of City gas distribution (CGD), presently supplying natural gas in the city of Mumbai, including adjoining areas and the Raigad District in the state of Maharashtra.

Zee Entertainment Enterprises Ltd

Zee Entertainment Enterprises is mainly in the following businesses: Broadcasting of Satellite Television Channels, Space Selling agent for other satellite television channels, and Sale of Media Content, i.e. programs /film, rights/feeds, and music rights.

Advantages of F&O Ban To Investors and Traders

F&O bans, while restricting some trading options, can offer some benefits to investors:

• Reduced Volatility: An F&O ban curbs excessive speculation in a stock’s price. This can help prevent wild price swings and create a more stable market for investors with long-term outlooks.
• Curbs Manipulation: Excessive trading activity in the F&O segment can sometimes be a tool for manipulating stock prices. The ban can make it harder for such practices to occur.
• Encourages Informed Decisions: When F&O activity is high, it might be driven by short-term trends and emotions rather than fundamentals. The ban can refocus investors on a company’s underlying health and encourage more informed investment decisions.

Disadvantages of F&O Ban To Investors and Traders

However, it’s important to remember that F&O bans also have drawbacks:

• Limited Trading Opportunities: Investors who use F&O contracts to hedge existing holdings or implement specific trading strategies may find their options limited during a ban.
• Potential Price Impact: The ban can restrict buying pressure in the cash market (where investors buy actual shares), leading to a temporary price dip.

Overall, F&O bans can be a valuable tool for stock exchanges to maintain market stability. But for investors, it’s crucial to understand how they might affect their trading strategies.

Disclaimer: This blog- has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. The information is based on various secondary sources on the internet and is subject to change. Please consult with a financial expert before making investment decisions.