The launch of futures and options contracts (F&O) on the Nifty Next 50 index was announced by the National Stock Exchange of India (NSE) on Thursday. This action is probably a part of a larger plan of action being done by the biggest stock exchange in India to recover some of the market share that it has lost to competitor BSE in the past year.
The exchange announced in a circular that NSE would begin offering monthly F&O futures on the junior Nifty 50 index on April 24. These contracts will expire on the final Friday of each month.
The NSE now offers major contracts that expire on all trading days of the week thanks to the introduction of derivative futures on the Nifty Next 50 index. Contracts on the Nifty Midcap 50 index expire on Mondays, while those on the flagship Nifty 50 and Nifty Bank indices expire on Thursdays and Wednesdays, respectively. Tuesdays are also the expiration date of contracts for the Nifty Financial Services index. In addition to the Friday Sensex expiry, BSE’s Bankex expiry is scheduled for Monday, providing the NSE with an open runway for the remaining three trading days.
This is a wise decision because Nifty Next 50, which consists of the best large and mid-cap stocks, would have excellent liquidity. Prior to now, the NSE had F&O on Nifty IT, but the volume was lower. According to Nandish Shah, senior derivative analyst and deputy vice president at HDFC Securities, “I think the launch of Nifty Next 50 is a good move.”
The exchange’s decision to launch a new derivative product with a Friday expiration date is probably an attempt to challenge the supremacy of its rival BSE, because only Sensex F&O contracts now have an expiration date on the final trading day of the week.
It is typical for new products to take 4-6 months to gain traction, hence the launch of Nifty Next 50 F&O would not have a significant initial impact on BSE Sensex volumes. Sudeep Shah, head of SBI Securities’ technical and derivatives research, stated that BSE is probably going to introduce more products by the time that occurs. Similar opinions were held by Shah.
Three serial monthly contracts for the Nifty Next 50 derivative contracts will be available for trading at any given moment, with a lot size of 10. Trading for Nifty Next 50 contracts for the May, June, and July expiry cycles will begin on April 24, according to an NSE circular.
Although NSE has always held a commanding market share, BSE experienced growth, going from 0.1% in May 2023 to 7.4% in March 2024. The biggest stock exchange in India has taken a number of actions during the past month, most likely to stop this loss of market share. This entails cutting the lot size for Nifty 50 F&O contracts from 50 to 25, reducing the lot sizes for two other indices, and reducing transaction expenses by 1% starting in April.
