NSE launches derivative contracts on Nifty Next 50, gets positive response

National Stock Exchange (NSE) on Wednesday introduced derivative contracts on Nifty Next 50 index, which received a positive response from market participants.

More than 375 trading members from across the country participated in the index derivatives, the National Stock Exchange (NSE) said in a statement.

The first day witnessed 1,223 contracts traded worth Rs 78.16 crore in Futures and 1,724 contracts worth Rs 1.55 crore of premium turnover in Options, it added.

The trading members involved in the execution of the initial trade include East India Securities Limited and Samco Securities Limited.

The Nifty Next 50 index provides representation to large capitalisation stocks beyond the Nifty 50 index.

The stocks part of the Nifty Next 50 are the potential contenders for being included in the coveted list of 50 stocks forming part of the Nifty 50 index subject to meeting the parameters specified in the index methodology.
 

"The derivative product is unique considering the underlying index does not have overlapping constituents with the other market capitalisation-based broad indices on which derivatives are available on NSE. With the increasing interest of participants beyond the top 50 stocks, this index will provide an additional tool for risk management," Sriram Krishnan, Chief Business Development Officer at NSE, said.

The financial services sector has the highest weightage in the index accounting for 23.76 per cent followed by the capital goods sector with 11.91 per cent and the consumer services sector with 11.57 per cent.

The Nifty Next 50 index futures and options contracts are available with trading cycle of 3 serial monthly contracts. The derivatives are cash-settled with the expiry day being the last Friday of the expiry month.

The exchange has provided a transaction fee waiver on the Nifty Next 50 Index derivatives up to October 2024.

The market capitalisation of Nifty Next 50 index constituents stood at Rs 70 trillion representing about 18 per cent of the total market capital of the stocks listed on NSE as on March 29, 2024. The aggregate daily average turnover of index constituents stood at Rs 9,560 crore accounting for around 12 per cent of cash market turnover in FY24.

Derivatives in market parlance refer to financial contracts between two or more parties and derive their value from an underlying asset or benchmark.

Broadly, there are two types of derivative contracts futures and options. A futures contract means a legally binding agreement to buy or sell the underlying security on a future date, while an options contract gives the buyer or holder of the contract the right to buy or sell the underlying asset at a predetermined price within or at the end of a specified period.