NSE opts for Nifty 50 in weekly options, following Sebi's benchmark mandate

Decision to comply with Sebi's mandate to curb frenzy in the futures & options

The National Stock Exchange (NSE) has opted for the Nifty 50 index for issuing weekly option contracts following the Securities Exchange Board of India (Sebi's) one-exchange-one-benchmark mandate.

This comes even as the Nifty Bank index clocked a higher notional turnover. 

The other two indices where weekly contracts will be discontinued are Nifty Financial Services and Nifty Midcap Select. 

Analysts expect a drop of up to 40 per cent in NSE's option premium turnover. 

According to a report by IIFL Research, Nifty Bank had a 38 per cent share in the 1HFY25 in the premium break-up followed by Nifty at 28 per cent. 

The monthly Nifty Bank contracts will continue.

Considering the dominance of Nifty Bank, several traders were awaiting the final decision by NSE.

The Nifty Bank, Nifty Midcap Select, and Nifty Financial Services not only provided a diversified product portfolio but also helped the exchange generate huge volumes, with each having an expiry on separate days of the week. 

Following the announcement, the Nifty Bank declined over 358 points or 0.7 per cent, while the benchmark Nifty ended the day at only 0.14 per cent decline.

The number of traded contracts of Nifty 50 remained higher topping 1 billion while the same for the Nifty Bank was 935 million during the past few weekly expires. 

Rival BSE has also decided to discontinue Bankex contracts and retain Sensex for the weekly segment.

These changes will be effective from November 20.

Analysts expect that the spill over of trading activity from the discontinued contracts into the continuing products will limit the impact.

The Sebi has prescribed a six-step regime to curb the frenzy in the index derivatives and curb retail losses, which stood at Rs 75,000 crore in FY24.