What is CNC Order? How Are CNC and MIS Different?

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What is CNC Order? How Are CNC and MIS Different?

The stock market consists of various terminologies which can be difficult to understand for a novice investor. One such term is CNC stock order. If you are going to start your investment journey in the share market, make sure to understand these terminologies, obtain knowledge on the stock market, how it works, how to invest, and so on. In this article, we are going to learn about CNC means in trading, How to place CNC orders in the share market? And the difference between CNC and MIS order

What is CNC Order?

Before understanding CNC orders, it is important to understand the types of orders in the share market. 

MIS: MIS (Margin Intraday Square Off) is a type of product code used for trading within the same day or intraday trading. MIS is used for trading in commodities and equity. Intraday traders have to square off the position before the closing of the market hour else the broker will automatically sell the shares at 3:30 pm. Also, the traders cannot carry forward the shares bought under the MIS order. However, the trader can short sell by repurchasing the shares using MIS code but the repurchase of shares must be done before 3:15 PM else the position will get squared off at 3:15 pm. Intraday trading allows traders to take advantage of short-term fluctuations in the share market. Also,  traders have the option to pay a margin of as low as 10% while trading.

Normal order: Normal order or NRML is a type of product code used for Future & Options trading. It helps traders to carry forward trades. For example, if you want to buy Nifty Futures & Options, you can choose NRML product type.

CNC orders mean cash and carry and it is used when you want to take delivery of the stocks while trading. Delivery trading allows you to hold the stocks for the long term or as long as you wish to hold them. The shares bought using CNC in the share market will be reflected in your Demat account after trading + 2 days. For example, you bought shares of a company using a CNC order on Friday. The shares will be delivered to your Demat account after the trading + 2 days. The trading day is the date when you bought the shares. Hence, you will receive the shares by Tuesday. The shares will be transferred from your Demat account if you intend to sell using a CNC order. However, using a CNC order while trading does not allow you to get leverage nor you can square off your position within the same day. You can sell the shares only when the stock is in an open position in CNC type.

CNC order in share market is comparatively safer than other orders because there is no involvement of margin. One thing you need to keep in mind is that if you use a CNC order to trade securities on the same day, it will still be viewed as intraday trading. Hence, you have brokerage charges as per intraday. 

Key Takeaways

  • CNC meaning in the share market is Cash and Carry.
  • The CNC share market allows the trader to take the delivery of the securities and in case of losses happen, you can stay invested as long as your investment earns a profit. 
  • CNC product type does not allow you to short-sell shares. 
  • Long-term investors who intend to hold the stocks for the long term should select CNC order to take the delivery of the stocks.

CNC Meaning in Share Market: CNC Orders

The CNC order does not offer any leverage to traders. Hence, traders can trade with the available in their Demat account. For example, if you buy 1000 shares at Rs. 100. You will have to pay Rs. 100000. Make sure that the Rs. 100000 amount is available in your Demat and trading account.

Shares bought under a CNC order can be sold on the same day. However, the trader has to pay intraday brokerage charges while buying and selling shares but the trader can not use CNC orders for short selling. The trader can sell shares only when the shares are available in the Demat and trading account. 

As per SEBI's new margin rules, when a trader sells shares by using a CNC product code, the trader will receive an 80% amount against sold shares on the same day. However, before the implementation of this rule, traders used to receive 100% credit on the same day. For example, let's say you sell 100 shares of ABC company using a CNC order, you will receive 80% of credit at the time of selling, and hence, you will be able to buy back only 80 shares of ABC company if you don't have the additional amount in your Demat account. 

How to Place a CNC order in the Share Market? 

  1. The first thing you need to do is open a Demat account from a stock broker that suits you. 
  2. There are two types of brokers available in the share market: Discount and full-service brokers. Full-service brokers offer investment advice, tax planning, and retirement planning and they charge high brokerage fees. They also provide relationship managers who assist you in making investments. Discount brokers charge fewer broker fees than full-service brokers and they do not offer any investment advice, tax planning, or retirement planning. 

If you are a novice investor and intend to invest in the share market for the long term then opening a Demat account from a discount broker is the suitable option. On the other hand, if you want to do active trading and have some years of experience trading in the share market then opening a Demat account with a discount broker is the suitable option.

  1. Once you decide on your broker, register yourself with the broker by providing the necessary details. You will be required to provide address proof, identity proof, income proof, and bank details to complete the KYC. Once the KYC is completed your Demat account will be activated and you will be all set to start trading in the share market. 
  2. Open your broker app on your smartphone or computer by logging in with your credentials.
  3. Search for the stock in the search bar you want to invest in. 
  4. Select the buy option, then you will be asked to select between CNC and MIS, select CNC, enter the quantity of stocks and select between a market order and limit order. If you select market order, you will buy the shares at market price and if you place limit order, the order will be executed only when the price of the shares will reach the limit order price. 
  5. Make sure to enter stop loss. 
  6. Investors and traders have the option to convert CNC to MIS and vice-versa. Firstly, you need to select the ‘portfolio’ option, then the position, and select the convert option to make any changes. Some brokers may charge conversion fees. 

Difference Between CNC and MIS Orders

  1. CNC's full form in the share market is cash and carry. Whereas the MIS full form in the share market is Margin Intraday Square off.
  2. The CNC order type is used for Delivery trading and the MIS order type is used for intraday trading. 
  3. CNC meaning in the share market is delivery orders, which means you will receive the shares in your Demat account after trading + 2 days. On the other hand, MIS order means Margin Intraday square-off, which means you have to close the position within the same day else your stock broker will close the position before the market ends.
  4. Using a CNC order does not allow you to take leverage and hence, you have to pay the full amount. On the other hand, using MIS order allows you to take additional leverage and margins.
  5. CNC order type is applicable for the cash equipment and CNC order type is applicable in Equity, Future & Options, commodity, and currency segments. 
  6. There is no availability of leverage or margin in the CNC share market. On the other hand, leverage is available up to 5x times for MIS orders. 
  7. Using CNC order type does not allow for short selling. Whereas MIS order type allows you to square off the position within the same trading day.a The brokerage charges of CNC order is lesser than MIS order. 
  8. The risk associated with the CNC order is less as it allows you to hold the stock as long as you want. On the other hand, the risk associated with the MIS order is high. 

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To conclude, understanding the various terminologies of the share market make you a smart investor and this is the reason every trader should be aware of the various types of product while placing orders. Make sure to stay updated about the new guidelines introduced by SEBI. 
This is not an investment advisory. The blog is for information purposes only. Investments in the securities market are subject to market risks, read all the related documents carefully before investing. Past performance is not indicative of future returns. Please consider your specific investment requirements, risk tolerance, goal, time frame, risk and reward balance, and the cost associated with the investment before choosing a fund, or designing a portfolio that suits your needs. The performance and returns of any investment portfolio can neither be predicted nor guaranteed. 

  • What is CNC in share market?

  • What is CNC full form in share market?

  • What is the difference between CNC orders and MIS orders?

  • What is CNC full form in share market?