While you can carry forward derivative positions using collateral margins, exchange regulations mandate that all Mark-to-Market (MTM) settlements must be cash-based. A negative balance in your funds statement indicates an MTM loss, which you must cover by a cash transfer before any further trading can be permitted. Trading and taking on new positions while you maintain a negative balance would effectively mean that the stockbroker is financing the derivative trades, a practice the exchange does not permit.
To prevent this situation, new trades are blocked if your cash balance is negative. This means you will be prohibited from taking new positions in equity intraday and F&O positions. However, you can still square off your existing positions as usual.
