Stock market investors often come across the terms CNC, MIS, NRML etc. while buying and selling stocks. This is because CNC, MIS and NRML are product codes used to determine the type of order investors place.
In this article, let’s take a detailed look at:
- What is CNC and CNC’s full form in the share market?
- What is the margin available in CNC orders?
- What is MIS?
Table of Contents
What is CNC and CNC’s full form in the share market?
CNC means ‘Cash and Carry.’ It is the product code used to buy or sell 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 + 1-day 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.
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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 is available in their trading account in credit and cannot avail of any leverage. So, 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 purchased under the 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 can sell shares using a Cash and Carry order only if the shares are available in the 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. However, in case the investor has additional funds or margin in his account, he has the option to buy back the entire 100 shares.
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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 commodities. All trades placed under the MIS code are automatically squared at a fixed time (usually at 3:15 pm).
Shares purchased under MIS order cannot be carried forward for trade to the next day. For example, if a person buys 1000 shares of XYZ company using MIS code, he must 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. Similarly, if a person short-sells 1000 shares of XYZ company using MIS code, he must repurchase the shares 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 the latest SEBI rules, stock brokers must collect Value at Risk (VAR) and Extreme Loss Margin (ELM) on an upfront basis from clients.
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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 the product type as NRML.
Key takeaways
- 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.
Closing thoughts
CNC, MIS and NRML are basic terms for placing orders that every investor should know. As mentioned above, the margin rules for CNC and MIS have changed drastically post the introduction of new guidelines by SEBI in a phased manner. For more details, please check with your investment advisor.
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