Stock market investors often come across the terms CNC, MIS, NRML etc. while buying and selling stocks. CNC, MIS and NRML are product codes used to determine the type of order placed by the investors.
In this article let’s take a detailed look at:
- What is CNC and CNC full form in share market?
- What is the margin available in CNC orders?
- What is MIS?
What is CNC and CNC full form in share market?
CNC means ‘Cash and Carry’. It is product code used for purchasing or selling shares on a delivery basis in the equity segment. When an investor purchases shares using the Cash and Carry option, the shares will be transferred to the investor’s Demat account on a Trading +2 days basis. The cash and carry option is ideal for investors who wish to purchase shares of a company for the long term or even hold it for a few days.
What is the margin available in CNC orders?
As evident from the term CNC or ‘Cash and Carry’ when using this type of order, investors can purchase shares only for that amount of limit that his available in his trading account in credit and cannot avail any leverage. For example, if an investor has a fund of Rs. 10,000 available in his trading account he can purchase shares worth Rs. 10,000.
Shares thus purchased under Cash and Carry order can also be sold on the same day. In this case the investor would be charged only intraday brokerage on his buy and sell transaction. However, an investor cannot use the Cash and Carry order for short-selling. An investor will be able to sell shares using a Cash and Carry order only if the shares are available in his demat account.
As per the latest Margin rules announced by SEBI when an investor sells stocks available in his Demat account using the Cash and Carry product code, he/she will receive only 80% credit against the sale value on the same day for subsequent trades. Earlier investors used to receive 100% credit on the same day.
Let’s understand this with the help of the below example:
If an investor sells 100 shares of TCS using a Cash and Carry order he will be able to buy back only 80 shares of TCS on the same day as 20% of the sale credit will be blocked. In case the investor has additional funds or margin in his account he has the option to buy back the entire 100 shares.
What is MIS?
MIS is an abbreviation used for Margin Intraday Square Off (MIS). It is a product code used for Intraday trading in equity and commodity trading. All trades placed under the MIS code are automatically squared at fixed time (usually at 3:15 pm).
Shares thus purchased under MIS order cannot be carried forward for trade to next day. For example, if a person purchases 1000 shares of XYZ company using MIS code, he has to sell it on the same day before 3.15 PM otherwise his position will get squared off automatically irrespective of whether the trade is profitable or not. Similarly, if a person short-sells 1000 shares of XYZ company using MIS code, he has to buy the same on the same day before 3.15 PM failing which the position will get squared off automatically.
In case the person has enough funds in his trading account, he has the option to convert MIS orders to CNC before the stipulated cut-off time.
As per latest SEBI rules, stock brokers have to collect Value at Risk (VAR) and Extreme Loss Margin (ELM) on an upfront basis from clients.
What is NRML?
NRML or the Normal Margin is a product code used to carry forward trades of futures and options. For example, if a person wants to buy Nifty futures and sell in after a few days he can do so by choosing product type as NRML.
- CNC and MIS are product codes used for buying and selling stocks on a delivery and intraday basis respectively.
- One cannot short-sell stocks while using the Cash and Carry product code.
- Orders placed using the MIS product code are squared off automatically at 3.15 PM irrespective of whether your trade is in profit or loss.
- NRML orders refer to positional orders in the derivatives segment.
CNC, MIS and NRML are some basic terms used for placing orders which every investor should be aware of. As mentioned above, the margin rules for CNC and MIS have changed drastically post the introduction of new guidelines by SEBI in phased manner. For more details on please check with your stockbroker.
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