This is a common scenario in the Indian stock market: You initiate an intraday trade on XYZ stock at 10:00 AM, expecting the price to rise by noon. You have used leverage, paying only 20% of the trade value. However, by 2:00 PM, the market takes a temporary dip due to global cues, and your position is in the red. You are confident the stock will recover tomorrow or next week, but the clock is ticking towards the broker’s auto square-off deadline. Do you book the loss? Or do you change the game?
This is where the facility of converting intraday to delivery becomes a trader's most valuable tool. It allows you to transform a short-term speculation into a long-term investment, giving your trade breathing room to perform. In the Indian context, this is often referred to as converting from "MIS" (Margin Intraday Square-off) to "CNC" (Cash N Carry). While the process involves a simple click on your trading app, the financial mechanics behind it, specifically regarding margin shortfalls and settlement are complex. This article provides a comprehensive guide to understanding this transition, helping you avoid penalties or unwanted liquidations.
Key Takeaways
-
Liquidity: You cannot convert a trade unless you have the full 100% value of the stock in your trading account; leverage does not apply to delivery.
-
Time Sensitivity: Conversion must be done before the broker's auto square-off time (usually between 3:15 PM and 3:20 PM).
-
No "Conversion Fee": There are generally no specific intraday to delivery conversion charges, but the brokerage structure will shift from intraday slabs to delivery slabs.
-
Risk Management: Conversion is an excellent strategy to avoid booking forced losses during temporary market dips, provided the stock is fundamentally sound.
Understanding Intraday Trading
Intraday trading, known technically as MIS (Margin Intraday Square-off) on most Indian platforms, is the practice of buying and selling stocks within the same trading session. The core appeal of intraday trading lies in "leverage." If a stock costs ₹1,000, a broker may allow you to buy it for just ₹200 (assuming 5x leverage). This allows traders to amplify their potential profits (and losses) with limited capital.
However, the golden rule of intraday trading is the deadline. All positions must be closed before the market session ends (typically by 3:30 PM, though brokers auto-square off earlier). If the price moves against you during the day, you are often forced to exit at a loss because you cannot hold the position overnight. Intraday trading is a fast environment suited for those who track technical charts and market momentum closely.
Understanding Delivery Trading
Delivery trading, or CNC (Cash N Carry), is the traditional form of investing. When you buy shares in delivery, you are paying the full value of the stock (100% of the price) and intending to hold them for more than one day. These shares are credited to your Demat account (managed by depositories like NSDL or CDSL) after the T+1 settlement cycle.
Unlike intraday trading, delivery trading carries no time limit. You can hold the shares for two days, two years, or two decades. This mode is wealth-oriented, allowing investors to benefit from dividends, bonus issues, and long-term capital appreciation. Because you own the asset fully (without leverage), you are not under pressure to sell when the market dips. You can wait out the volatility. The shift from an intraday mindset to a delivery mindset is a shift from speculation to ownership.
Also Read: Difference Between Intraday & Delivery
How to Convert Intraday to Delivery?
The process of converting intraday to delivery is designed to be seamless on modern trading apps. However, it requires precise execution.
Step 1: Navigate to Open Positions
Open your trading application or web portal. Do not go to your "Holdings" or "Portfolio" tab, as the trade has not settled yet. Instead, navigate to the "Positions" or "Day's Positions" tab. Here, you will see your active MIS (Intraday) trade running.
Step 2: Select the Position to Convert
Click on the specific stock symbol you wish to convert. You will typically see options like "Exit," "Add," or "Convert." Click on "Convert Position" or "Convert to Delivery/CNC."
Step 3: Choose Quantity
Most platforms allow partial conversion. If you bought 100 shares intraday but only have funds to hold 50 shares for delivery, you can enter "50" in the quantity box. The remaining 50 will remain as intraday and must be squared off before the market closes.
Step 4: Confirm Conversion
After entering the quantity, click "Confirm" or "Submit." The system will instantly check your available cash balance. If you have sufficient funds to cover the full value of the shares, the conversion will be successful. The tag next to your trade will change from "MIS" to "CNC" (or "NRML" depending on the broker).
What are the Margin Requirements for Conversion?
This is the most critical aspect of the process. The failure to understand margin is the #1 reason why traders fail at converting intraday to delivery.
In an intraday trade, you are utilizing leverage provided by the broker. For example, to buy ₹1 Lakh worth of Reliance shares, you might have only paid ₹20,000 (20% margin). The broker funded the rest for the day.
However, delivery trading does not allow leverage. To convert this position to delivery, you must pay the remaining ₹80,000.
-
The Math: If you want to convert, your trading account must have a "Free Cash Balance" equal to the difference between the Full Trade Value and the Margin Already Paid.
-
Scenario:
-
Stock Value ₹1,00,000
-
Intraday Margin Used ₹20,000
-
Funds Required to Convert ₹80,000
If your account balance is only ₹50,000, the system will reject the conversion request stating "Insufficient Funds." You must add funds to your account via UPI or Net Banking immediately if you wish to proceed with the full conversion.
How to Exit an Intraday Position and Convert to Delivery
It is important to clarify the terminology here. You do not "exit" an intraday position to convert it; you "modify" it.
If you "exit" the position, you are effectively selling the shares and booking your profit or loss. The trade is over. To convert, you simply change the product type from MIS to CNC while keeping the trade active.
Once the conversion is successful, the trade is no longer subject to the 3:20 PM deadline. You do not need to do anything else for the day. The shares will be purchased effectively at the price you originally entered the intraday trade at. After the market closes, the exchange will process this as a standard delivery trade. The shares will be credited to your Demat account by the next evening (T+1 settlement).
If you decide to sell these shares the next morning or a week later, you will follow the standard "Sell" procedure from your "Holdings" tab.
What Happens If You Do Not Exit From Your Position?
If you cannot convert the position due to a lack of funds and you fail to exit (sell) the position manually, the broker's risk management system takes over.
Auto Square-Off
Brokers have a strict deadline, typically between 3:15 PM and 3:20 PM. If your intraday (MIS) position is still open at this time, the broker's risk management system will automatically place a market order to sell your shares at whatever price is available.
Consequences:
-
Loss of Control: You cannot choose the price. If the market dips suddenly at 3:15 PM, you exit at the bottom.
-
Call & Trade Charges: Many brokers charge a penalty or an extra fee (ranging from ₹20 to ₹50 per order) for auto square-off, as their system had to intervene.
-
Opportunity Loss: You lose the chance to hold the stock for a potential recovery the next day.
Therefore, if you intend to convert, do it well before 3:00 PM to ensure you have time to add funds if necessary.
Also Read: Types of Stock Market Trading
Benefits of Converting an Intraday Position to Delivery
Converting intraday to delivery is often used as a defensive strategy, but it has offensive benefits too.
1. Avoiding Forced Losses
The most common reason traders convert is to avoid booking a loss. If you bought a stock and it fell by 2%, selling it intraday locks in that loss. By converting to delivery, you give the stock time to recover. If the stock is fundamentally strong, the price may bounce back in a few days, allowing you to exit at a profit or breakeven.
2. Riding the Trend
Sometimes, a trade starts as a quick scalp but reveals a strong breakout trend. If you see the stock closing at a day high with strong volume, you might want to hold it for a few more days to capture a larger swing. Conversion allows you to ride this momentum.
3. Dividend Eligibility
If you hold an intraday position on the "Ex-Date" of a dividend and convert it to delivery, you become eligible to receive the dividend, provided you hold the stock until the record date requirements are met.
4. Reduced Stress
Intraday trading requires glued-to-the-screen attention. Converting to delivery removes the time pressure, allowing you to manage the trade with a clearer mind.
What Are the Charges for Converting Intraday to Delivery?
A common query among traders concerns the hidden costs. Specifically, are there intraday to delivery conversion charges?
Technically, there is zero fee for the act of clicking the "Convert" button. Brokers do not charge you a penalty for changing the product type.
However, the cost structure of the trade changes retroactively.
-
Brokerage: Intraday trades often carry a flat fee (e.g., ₹20 per order). Delivery trades might be free (0 brokerage) on discount brokers, or they might charge a percentage (e.g., 0.5%) on full-service brokers. When you convert, you will pay the brokerage applicable to Delivery Trading.
-
STT (Securities Transaction Tax): This is a significant difference. STT on Intraday equity selling is 0.025%. STT on Delivery equity is 0.1% on both buy and sell. Therefore, your tax burden increases slightly when you convert.
-
DP Charges: When you eventually sell the converted delivery shares (after T+1 days), you will incur a Depository Participant (DP) charge (approx. ₹13-₹15 + GST) for debiting shares from your Demat account. Intraday trades do not attract DP charges.
So, while there are no explicit intraday to delivery conversion charges, the overall cost of the trade usually increases slightly due to higher taxes and DP charges.
Conclusion
Mastering the art of converting intraday to delivery gives a trader immense flexibility. It acts as a bridge between the high-speed world of speculation and the patient world of investing. Whether you are converting to save a trade from a temporary market correction or to capitalize on a long-term bullish trend, the feature is a vital part of risk management. However, you must always maintain sufficient liquidity in your account to cover the full 100% value of your positions. Never enter an intraday trade with the mindset "I will convert if it fails" unless you actually have the funds to back that decision. Used wisely, conversion can save your capital; used recklessly without funds, it leads to forced liquidations and unnecessary stress.
