Rakesh Jhunjhunwala portfolio stocks Delta Corp and Escorts in F&O ban. Understand the implications of the ban

Rakesh Jhunjhunwala's portfolio stocks Escorts and Delta Corp under F&O ban!

stock ban

What is a F&O ban?

F&O ban might sound like a big deal, but it is very common. When the total exposure in the futures and options segment crosses 95% MWPL (market-wide position limit), the security is put under an F&O ban. This is done to reduce the risk of non-delivery of the stock. This ensures that the total exposure in the stock does not exceed the market-wide position limit. When the market-wide position limit comes down to 80%, the F&O ban is removed. 

Earlier, Escorts was already under the ban. Now, Balrampur Chini and Delta Corp have been added to the ban. Two of the stocks, i.e. Delta Corp and Escorts, are from Rakesh Jhunjhunwala's portfolio. Thus, the market participants cannot take fresh positions in the F&O segment of the stocks. 

Related: This Rakesh Jhunjhunwala stock gives 15% CAGR over 20 years 

What are the benefits of the F&O ban?

The F&O ban is used to ensure that too much exposure is not taken up in a particular stock. If the exposure is more than 100%, there can be a non-delivery of stock in case of the price increases a lot or non-payment of money in case the price falls substantially. Thus, the F&O ban limits the risk from the F&O segment.

When will the F&O ban end?

It cannot be guaranteed when the ban will end, but it should end soon. As soon as the MWPL falls below 80%, the F&O ban will be removed. Till then, if you are a trader, make sure to only reduce your exposure and do not take fresh positions in these stocks in the F&O segment. You might have to face a penalty if you take a position under the ban period. But you can reduce your exposure if you want to. 

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The F&O ban is used to limit the exposure in the F&O segment. Three stocks are under the F&O ban- Two Rakesh Jhunjhunwala portfolio stocks, Escorts and Delta Corp, and Balrampur Chini. These stocks will be removed from the F&O ban when MWPL in these F&O stocks is reduced below 80%. This should happen soon, and till that time, you should avoid trading in these stocks in the F&O segment, or else you might face a penalty.

To learn more about F&O, read What is F&O in stocks and indices?

F&O Trading Ban Explained!


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