CNC product code on Zerodha

CNC (Cash and Carry) is a product code on Kite, Zerodha’s trading platform, that designates an equity trade as a delivery transaction. When a trader selects CNC for a buy order, Zerodha blocks the full transaction value from the available cash balance (no leverage), and upon execution, the shares are credited to the trader’s demat account on T+1 settlement. When CNC is selected for a sell order, shares are deducted from the demat account and the proceeds are credited after settlement.

CNC is the standard product code for long-term investors and anyone who intends to hold shares beyond the current trading day. It contrasts with MIS (Margin Intraday Squareoff), the intraday product code, and MTF (Margin Trading Facility), which provides leverage for delivery positions.

What “cash and carry” means

The phrase “cash and carry” reflects the traditional mechanics of equity delivery settlement in Indian markets:

• Cash: The buyer pays the full transaction value. No margin leverage is extended.
• Carry: The shares are carried over to the buyer’s demat account and can be held for any duration, one day, one year, or indefinitely.

Unlike futures and options, which are marked to market daily and require margin maintenance, CNC equity positions do not attract daily margin calls. The position is owned outright by the investor, and value changes affect the portfolio value but do not trigger forced liquidation.

Settlement cycle, T+1

India moved from T+2 to T+1 equity settlement in phases, with full T+1 settlement operative from January 2023 for all NSE and BSE equity securities. Under T+1:

• A buy order executed on Day 0 (T) results in shares being credited to the buyer’s demat account on Day 1 (T+1).
• A sell order executed on Day 0 results in proceeds being credited to the seller’s bank/trading account on Day 1.
• Exchange and SEBI holidays are excluded from the T count. Weekend trades settle on the next working day.

For BTST (Buy Today Sell Tomorrow) transactions, shares purchased on Day 0 under T+1 settlement are technically not yet in the demat account on Day 1. Zerodha generally permits BTST trades but with certain restrictions.

Charges under CNC

Brokerage: Zerodha charges zero brokerage for equity delivery trades under CNC. This is one of Zerodha’s defining value propositions for long-term investors.

Other charges (applicable regardless of broker):

• Securities Transaction Tax (STT): 0.1% on both buy and sell for delivery trades.
• Exchange transaction charges: NSE, approximately 0.00297% on turnover; BSE, approximately 0.00375%.
• SEBI charges: Rs 10 per crore of turnover.
• Stamp duty: 0.015% on buy-side only (delivery).
• GST: 18% on brokerage + exchange transaction charges.
• Depository charges: Applies on sell-side delivery transactions (CDSL/NSDL).

The zero-brokerage CNC structure makes Zerodha particularly competitive for buy-and-hold investors compared with traditional full-service brokers.

How to place a CNC order on Kite

1. Open the instrument on Kite (search bar or watchlist).
2. Click “Buy” (or “Sell” for an existing holding).
3. Select “CNC” from the product dropdown.
4. Choose the order type (market, limit, SL, SL-M).
5. Enter quantity and price (if limit order).
6. Review the order and submit.

Kite requires sufficient free cash balance to place a CNC buy order. If the available cash is insufficient, the order will be rejected with a margin error.

Pledging and margin against CNC holdings

Shares held in the demat account under CNC can be pledged to Zerodha to obtain margin for F&O or intraday trading. Pledged shares remain in the demat account and can be traded simultaneously (though certain restrictions apply). Zerodha facilitates pledge-based margin through its CDSL depository participant relationship.

A pledge requires an explicit authorisation by the demat account holder through CDSL’s TPIN or OTP-based system. The haircut (reduction in collateral value) varies by instrument and is set by the exchange.

CNC and short selling

Short selling under CNC is not permitted. Selecting CNC for a sell order requires the trader to hold the shares being sold in their demat account. CNC sells without corresponding demat holdings are rejected by Zerodha.

Short selling in the equity segment must be done using the MIS product code (intraday short selling) or through F&O positions using NRML or MIS.

GTT integration with CNC

GTT (Good Till Triggered) orders are most commonly placed with the CNC product code for long-term investors. A GTT buy trigger with CNC product code will accumulate delivery shares at the target price without requiring daily monitoring.

CNC versus MIS and MTF

Common mistakes and edge cases

Selling shares not yet settled. Shares bought yesterday under T+1 are in the demat account today. However, shares bought today are not yet settled, they arrive tomorrow. Selling today’s purchases before settlement (BTST) is permitted by Zerodha but comes with risks around short delivery.

Insufficient balance at order time. CNC orders require the full transaction value to be available. Traders sometimes mistake available margin (which may include F&O margin) as available for CNC equity purchases. Only actual cash and liquid funds count toward CNC purchase eligibility.

CNC selected for an intraday strategy. A trader who intends to close a position the same day but selects CNC instead of MIS will not receive auto-square-off. The position carries over to the next day, potentially incurring overnight risk and blocking capital.

Accidental short position. A trader who intends to sell a delivery holding but selects the wrong quantity may sell more shares than held. Zerodha would reject the oversell with CNC, preventing an unintended short.

Regulatory context

Equity delivery settlement in India is regulated by SEBI and governed by the clearing corporations (NSE Clearing Limited and BSE’s Indian Clearing Corporation Limited). The T+1 settlement framework was mandated by SEBI in 2021 and fully implemented in 2023. SEBI’s regulations require brokers to clearly distinguish delivery product codes from intraday product codes in their client interfaces.

References

1. SEBI circular on T+1 settlement, SEBI/HO/MRD/2021 series.
2. NSE circular on T+1 implementation, NSE/MEM/2022 series.
3. Zerodha support article: “What is CNC?”, support.zerodha.com.
4. Zerodha charges page, zerodha.com/charges.
5. SEBI master circular on brokers and trading members, SEBI/HO/MRD/2023 series.