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 Ratnakar Bank Ltd) is a private sector bank in India, established in 1943 and headquartered in Mumbai. It offers a wide range of services, including retail banking, corporate banking, and treasury operations. The bank has rapidly expanded in recent years, with a strong presence in both urban and semi-urban areas. It is known for leveraging technology to deliver innovative banking solutions.
Sammaan Capital Ltd
Sammaan Capital Ltd is a lesser-known non-banking financial company (NBFC) operating in India. It primarily engages in lending and financial services, particularly focusing on small and medium enterprises (SMEs) and underserved markets. It also provides corporate mortgage loans, lease rental discounting, and residential construction finance. The company aims to promote inclusive growth by providing capital access to entrepreneurs and businesses that often lack formal financing options.
HFCL Ltd
HFCL is a leading Indian telecom infrastructure company, founded in 1987 and headquartered in Gurugram, Haryana. It is involved in manufacturing telecom equipment, optical fiber cables, and providing turnkey solutions for the telecom and defense sectors. The company has played a significant role in India’s digital and broadband expansion, including government projects like BharatNet. It has also been investing in next-generation technologies such as 5G and IoT solutions.
Merits 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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