The NSE's decision to add derivatives contracts for the Nifty Next 50 index is a strategic move to expand its futures and options (F&O) offerings, bringing the total number of indices to five in this space. By re-launching contracts for the Sensex and Bankex, the NSE has been steadily increasing its market share and attracting a broader range of market participants. Currently, the Nifty 50, Nifty Bank, Nifty Financial Services Index, and Nifty Midcap Select are the indices where F&O contracts are actively traded, but the addition of the Nifty Next 50 index is expected to provide investors with more opportunities for diversification and risk management.
The Nifty Next 50 index comprises 50 companies from the Nifty 100, excluding those already included in the Nifty 50 index, serving as a stepping stone for companies aspiring to get listed in the widely-watched Nifty 50 index. Reflecting a similar sectoral composition as the Nifty 50 index, the Next 50 index has a significant exposure to the financial services sector, followed by capital goods and consumer services. The total market capitalization of the index constituents as of March 29, 2024, stands at Rs 70 trillion, representing a substantial portion of the overall market capitalization of stocks listed on the NSE, with daily average turnover also making a significant contribution to the cash market turnover.
In an effort to enhance market accessibility, NSE has adjusted the lot sizes for its index derivatives and stocks to reduce the entry barrier for investors, aiming to make trading more inclusive and diverse. The turnover for index derivatives on NSE in April has already reached Rs 3.77 trillion, indicating a robust market interest in these financial instruments. This move by NSE not only aligns with market demands but also positions the exchange favorably in the highly competitive landscape of Indian stock markets, further solidifying its foothold and relevance in the futures and options segment.