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Why doesn’t Zerodha allow trading of stocks in GSM and S+ category?

Note: Trading in GSM scrips will be allowed on our terminals from 14.05.2018 after blocking appropriate additional margins.

The list of GSM scrips can be found on NSE and BSE.

Scrips that form part of the GSM list are essentially scrips that witness price swings that aren’t in sync with the fundamentals of the company.

We believe an investor has to exercise extreme levels of caution before venturing into trading these securities.

Also if these scrips form part of GSM Stage III and above, additional margins get levied sometimes as high as 200% of the traded value in addition to the purchase value. So if you’re buying stocks worth Rs.1 lac, you would essentially be blocking 3 lacs of your capital. Additionally, there are liquidity concerns as well with stocks being allowed to trade once a week or once a month also if it’s higher than Stage III GSM.

Initially, when GSM was introduced, we did allow trading for a brief period but then we realized that our clients didn’t understand the additional margins and also there were cases of accounts going into debit and clients having to pay interest on such debits. Hence, keeping in mind the interest of the investors, we disallow trading in such GSM scrips, a lot of other brokers as well don’t allow trading in GSM scrips for such known reasons.