Stock exchanges are market places that attract people from different segments like Stocks, F&O, Currency, Commodity etc. There are speculators, and then there are investors. Some transact daily, while some may not touch their portfolio for years. The advent of online stock trading has enabled many participants to transact in the market – there is room for everyone.
Whatever your style of trading or investing, the primary step to the ladder of success is to have complete knowledge about the process and the elements involved.
An investment in knowledge pays the best interest.Benjamin Franklin
In this article, we will examine Trade 2 Trade stocks and the factors related to dealing with them.
What are Trade 2 Trade / T2T Stocks?
There are around 5,000 securities listed on the Indian stock exchanges. Among these, some are rated as blue-chip stocks. The different categories of stocks could be high-growth stocks, dividend-paying stocks, value stocks, penny stocks, etc.
Another kind of stock is Trade 2 Trade stock. The list of this segment includes stocks in which any purchase or sale has to result in compulsory delivery. In simpler terms, you cannot square-off positions intraday in these stocks.
What are the characteristics of Trade 2 Trade stocks?
✅ The characteristics of Trade 2 Trade stocks are as follows:
- The Stock Exchanges draw up the list of these stocks in consultation with SEBI.
- Stocks are shifted to this list on a fortnightly basis. The movement to and from this list is decided every quarter.
- The F&O segment stocks are not added to the Trade 2 Trade list.
✅ The criteria to fall under Trade 2 Trade stocks are as follows:
- The P/E ratio of the stock becomes exceedingly high.
- The price of the stock is highly volatile.
- The market cap of the stock is below Rs. 500 crores.
✅ The reasons for creating a Trade 2 Trade list are:
- Curb speculation.
- Prevent price manipulation.
- Safeguard the interests of market participants.
How does Trade 2 Trade stocks impact investors?
Does this mean that online stock trading is not possible for stocks that appear in the T2T list? Of course not. There is no restriction in buying or selling these shares. However, the following points need to be kept in mind while dealing with T2T stocks:
- The delivery of such stocks is compulsory. So if you buy, you need to take delivery; similarly, if you sell, you need to give delivery.
- Intraday trading or squaring-off positions for intraday trades is not allowed.
- Buy today, sell tomorrow (BTST), and sell today, buy tomorrow (STBT) are also not allowed.
- T2T stocks have a price circuit limit of 5% either way.
So we can see that T2T stocks are not untouchable. If you are holding a stock that gets moved to this list, there is no need to despair. Similarly, if you were planning to buy any stock from the T2T list, there is no need to worry.
Market professionals consider the these stocks as definitely better than Z group stocks, which have fundamental or compliance issues. You must note that you should trade in Trade to Trade stocks after carrying out proper due diligence on the company’s track record and financial position.
Here are some more insightful articles on stock market trading which will walk you through the basics in buying & selling shares, building of strategies & much more.
Happy Trading 📈