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Tata Power, one of India's largest energy companies, has been banned from the futures and options trading segment for Tuesday, 19th April.
If derivative contracts of a share cross the 95% mark of the Market Wide Position Limit (MWPL), they end up being banned. In such a condition, the traders cannot take any fresh positions in said contracts, but can actively reduce their positions.
“All clients/members shall trade in the derivative contracts of the said security only to decrease their positions through offsetting positions. Any increase in open positions shall attract appropriate penal and disciplinary action,” the NSE said.
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F&O contracts of stocks get banned for a certain period when Open Interest in them exceeds 95%. Stock Exchanges set the MWPL, which is the maximum number of open contracts at any moment, to help reduce speculation in the stocks.
This is not the first time that trader interest in the derivatives contracts of the stock has led the stock into a ban list. On 15th Feb 2022, the derivatives were placed on the ban list alongside four others.
The stock of Tata Power isn't performing very well these days. The scrip has contracted around 13% in less than 2 weeks. On 18th April, when the indices fell over 1%, the share witnessed a full gap down opening and fell around 5.5% in a single day.
This is an unexpected response, especially after the company announced a sale of around a 10.5% stake for a sum of Rs 4,000 crore to BlackRock asset management. This deal has valued Tata Power's renewable energy business at $5 billion. Brokerage IIFL Securities has downgraded the share, claiming that it close on 13th April i.e. Rs 273 per share, is a fair value for the stock.
The stock opened down for the fourth day in a row and has fallen 1.49% in early trading hours today.
Article by Aman Agarwal.
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