Futures and Options (F&O) are financial contracts that allow traders to buy or sell assets like stocks, commodities, or indices at a predetermined price on a future date.
F&O contracts provide traders and investors with an opportunity to hedge, speculate, and leverage their positions in the market. However, the exchanges periodically review and reassess the eligibility of stocks for inclusion in F&O trading.
The decision to exclude a stock from F&O contracts can be based on various factors, including low liquidity, high volatility, or non-compliance with regulatory requirements.
Demerits for stock on Exclusion
When a stock is excluded from the F&O segment, here are the demerits of the exclusion
- Reduced Liquidity: F&O contracts typically enhance liquidity in a stock. Exclusion can lead to decreased trading volumes, making it harder for investors to buy or sell the stock easily.
- Lower Market Interest: Without the ability to trade F&O contracts, the stock may attract less attention from institutional investors and traders who use these contracts for hedging or speculation.
- Price Volatility: The absence of F&O trading can lead to higher price volatility, as the stock may face less market depth and fewer players engaging in trades.
- Limited Hedging Options: Investors and traders may lose the ability to hedge their positions using F&O contracts, which could result in greater risk exposure.
- Impact on Stock Performance: F&O exclusion can lead to a reduction in overall investor confidence, potentially causing a dip in the stock’s performance.
Here is the List of stocks to watch out for:
RBL Bank Ltd
RBL Bank, formerly known as Ratnakar Bank, is a private sector bank headquartered in Mumbai, India. Established in 1943, it offers a wide range of services including retail banking, corporate banking, and treasury operations. The bank has expanded rapidly in recent years, focusing on digital innovation and financial inclusion. It operates a strong network of branches and ATMs across the country.
Oracle Financial Services Software (OFSS)
Oracle Financial Services Software Limited is a subsidiary of Oracle Corporation and is headquartered in Mumbai, India. The company provides IT solutions primarily for the banking and financial services industry, including core banking, risk management, compliance, and analytics software. Its flagship product suite, Flexcube, is widely used by banks globally. OFSS leverages Oracle’s global capabilities to serve clients in over 130 countries.
HFCL (Himachal Futuristic Communications Limited)
HFCL is an Indian telecom infrastructure company engaged in the manufacturing of optical fiber cables, telecom equipment, and turnkey services. Founded in 1987 and headquartered in Delhi, HFCL plays a key role in India’s digital and broadband expansion. It is a significant supplier to government and private telecom projects, including BharatNet. The company is also expanding into newer areas like 5G equipment and smart city solutions.
Demerits for stock on Exclusion
When a stock is excluded from the F&O segment, it can bring some benefits. The reduced speculative and derivatives-based trading helps stabilize prices and lowers the risk of manipulation. This shift encourages a focus on the company’s fundamentals, attracting more long-term investors. Volatility may decrease, leading to more natural price discovery. Additionally, retail investors often feel more confident entering such stocks, boosting broader market participation.
Written by Sridhar J
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