Nifty Financial Services, heavier weight than Bank Nifty, will now be traded in the Derivatives segment. In our previous story, we cleared the basics of Derivatives, including Futures and Options. If you missed it or want a recap, you can read it here. Well, now let’s delve deeper into the new financial product – Nifty Financial Services Index Futures & Options.
Crux of the Matter
Nifty Financial Services F&O
Launched on September 7, 2011, Nifty financial services is the index to record and reflect the behaviour of the Indian financial services companies which include banks, insurance companies, financial institutions, housing finance and other financial services companies.
- This index has 20 constituents – all of them are listed on the National Stock Exchange (NSE). We can say that the underlying assets (securities) for this derivative product will be these 20 stocks.
- The Nifty Financial Services (NFS) Index will be traded on Futures and Options from 11th January 2021.
- The contract lot size will be 40, meaning 1 NFS derivative will have 40 contracts.
- The beta (sensitivity of the stock to the movement in the Nifty or the stock market) will be 1.20 to 1.25, meaning a 100 point movement in Nifty may lead to 125 point movement in NFS F&O.
- The Index will be a more powerful indicator than Nifty Bank index since it has a few other important non-banking financial companies.
The total free-float market capitalization of the Nifty Financial Services index is 25.11 lakh crores as compared to 17.44 lakh crores of Nifty Bank. (Free-Float Market Cap = Total Shareholding – Promoters’ Holdings).
Looking forward to the mega-IPO plan of LIC by the Government, the plan of making the Nifty Financial Services Index traded in Futures and Options seems reasonable and inevitable since LIC will be added to this index in future post its IPO.
Summachar brings you this story in collaboration with Finmedium that can be found on Instagram at @finmedium and on the web here.
- In finance, being short in an asset means investing in such a way that the investor will profit if the value of the asset falls. This is the opposite of a more conventional “long” position, where the investor will profit if the value of the asset rises.
- A corporate promoter is a firm or person who does the preliminary work incidental to the formation of a company, including its promotion, incorporation, and flotation, and solicits people to invest money in the company, usually when it is being formed. An investment banker, an underwriter, or a stock promoter may, wholly or in part, perform the role of a promoter.
- A fiduciary is a person who holds a legal or ethical relationship of trust with one or more other parties (person or group of persons). Typically, a fiduciary prudently takes care of money or other assets for another person.