The National Stock Exchange (NSE) is set to expand its derivatives offerings with the launch of Nifty Next 50 index derivatives on April 24, 2024, following the approval from the Securities and Exchange Board of India (SEBI). This move will provide investors with additional opportunities to trade and manage risk in the Indian equity markets.
The Nifty Next 50 index, also known as the Junior Nifty, comprises 50 companies from the Nifty 100, excluding the constituents of the Nifty 50. The index represents the space between the large-cap Nifty 50 and the mid-cap Nifty Midcap Select indices. As of March 2024, the Nifty Next 50 had a significant representation from the financial services sector (23.76%), followed by capital goods (11.91%) and consumer services (11.57%).
The exchange will offer a cycle of three serial monthly index futures and index options contracts, which will be cash-settled and expire on the last Friday of the expiry month.
The NSE has highlighted the similarities between the Nifty Next 50 and the Nifty 50 indices, noting that both have the highest weightage allocated to the financial services sector, at 23.76% for the Next 50 index. The capital goods and consumer services sectors follow, with weightages of 11.91% and 11.57%, respectively, in the Nifty Next 50 index.
The NSE has underlined the importance of the Nifty Next 50 index by revealing that the companies within this index have a combined market capitalization of Rs 70 trillion, which accounts for approximately 18% of the total market capitalization of all stocks listed on the NSE as of March 29, 2024.
Furthermore, the NSE noted that the average daily turnover of the index constituents amounted to Rs 9,560 crore, representing around 12% of the cash market turnover in the financial year 2024. These figures demonstrate the significant market presence and liquidity of the Nifty Next 50 index constituents, providing a strong rationale for the introduction of derivatives contracts based on this index.
With the Nifty Next 50 becoming the fifth index to be added to the futures and options (F&O) space, the NSE continues to expand its offerings and cater to the diverse needs of market participants.
