MIS and CNC are one of the most common terms often we come across while investing in the share market. MIS and CNC refer to product codes that determine the order type placed by the investor. For basic understanding it is also important to know MIS full form in share market.
Let’s take a detailed look at the below commonly used terms in this article:
What is MIS and MIS full form in share market?
What is CNC?
How much margin is available in CNC orders?
What is MIS and MIS full form in share market?
MIS stands for Margin Intraday Square Off (MIS), a product code used for Intraday trading in equity as well commodity trading. Trades placed using the MIS code are squared off automatically at fixed time (generally at 3:15 PM).
Stocks purchased using the MIS option cannot be carried forward for trade in the following day.
Let’s understand this with the help of the below example:
Rajesh, a trader purchases 100 shares of Tata Power using MIS code in the morning session of the market. Rajesh will have to sell it on the same day itself before 3.15 PM, failing which his position automatically get squared off at 3.15 PM whether he is making any profit or not. If instead of buying stocks, Rajesh is short-selling stocks using MIS code, he has to purchase the same quantity on the same day itself before 3.15 PM. In case he fails to do so his position will be squared off by default.
However, if Rajesh has enough funds in his account, he can convert his MIS orders to CNC to take delivery of the stocks before the specified cut-off time.
According to latest rules issued by market regulator, SEBI stock brokers are required to collect on an upfront basis the Value at Risk (VAR) and Extreme Loss Margin (ELM) from customers.
What is CNC?
CNC stands for ‘Cash and Carry’, a product code which denotes purchase or sale of shares on a delivery basis in the stock market’s equity segment. In case of shares purchased using the CNC, the investor will receive the same in his/her demat account on the basis of Trading +2 days. Using the CNC is best option for those investors who intend to purchase shares of a company with the objective of holding it for a few days/weeks/months or years.
How much margin is available in CNC orders?
While placing orders using the CNC option, an investor can purchase stocks only to the extent of credit limit available the trading account. There is no leverage facility available in the CNC.
According to new margin rules issued by market regulator SEBI, when you sell stocks held in your demat account using the CNC, you will receive only 80% credit of the entire sale amount on the same day.
Let’s understand this with the help of the below example:
Rajesh, an investor has a fund of Rs. 50,000 in his trading account. In case he wishes to buy stocks of a particular company or different stocks of different companies, he can purchase maximum shares worth Rs. 50,000. He can also sell the shares that he purchased using the CNC on the same day itself. In such a scenario, even though he purchased shares using the CNC, he would still be charged brokerage on an intraday basis for the entire transaction. However, Rajesh cannot select the CNC option for short-selling of stocks. He will be able sell shares using CNC only if he has the shares in his demat.
If Rajesh sells 200 shares of Powergrid that he holds in his demat account using CNC, he will be able to buy back only 160 shares of Powergrid on the same day due to blockage of 20% of the sale credit. However, if Rajesh wants to buy back all the 200 shares of Powergrid that he sold earlier in the day, he can still do so by adding additional funds to his trading account.
Important points to remember
MIS code is used for buying and selling stocks on an intraday basis while CNC code is used for buying and selling stocks on a delivery basis.
You cannot do short-selling stocks using CNC code.
When you place orders using the MIS product code it will be automatically squared off at 3.15 PM regardless of whether the trade is profitable or loss-making.
Bottom line
Every investor should be aware of the common terms used in stock investing like MIS and CNC. It is equally important for you to check the margin rules before trading or investing.
Click here to open a free trading and demat account and trade at the lowest brokerage rate of just Rs. 18/- per order.
– Written and contributed by Pradeep Sukumaran.
