Average six-month returns of a stock that exited the F&O segment between 2020 and 2022 was 7.72%, while the average one-year return was 53.90%, showed data compiled by Samco Securities.
Eight out of 14 stocks have generated positive returns after exiting the F&O segment within a year. The actual percentage returns will be higher if Yes Bank is excluded from the calculations. Yes Bank shares corrected sharply because of corporate governance issues.
The National Stock Exchange (NSE) excluded Whirlpool of India from the F&O segment from May 26, 2023. Its stint in the F&O segment was relatively short. It entered the F&O segment in October 2021 and exited in May 2023. The stock has gained nearly 7% since the NSE announcement of F&O exclusion on March 27.
Exclusion from the F&O segment can lead to short-term unwinding of arbitrage trades, but once that effect wears off, the stock would do well with limited options of short selling, said analysts.”Exit from F&O means that short sellers cannot sell the stock beyond the intraday time frame,” said Apurva Sheth, head of market perspectives and research at Samco Securities. “Reduced selling pressure means the probability of the stock price moving up increases.”
Another interesting aspect is that generally, the stocks that have delivered positive returns six months forward have moved on to deliver even higher returns on a one-year basis. For instance, Century Textiles was up 31.88% in 6 months. It went further up and more than doubled a year later. Similarly, NCC more than doubled within six months of its F&O exit and tripled within a year. Just Dial also gained 71% within six months of F&O exit and nearly tripled in a year.
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