NSE to issue derivatives on the Nifty Next 50 Index starting from April 24, 2024.
Coimbatore – The National Stock Exchange of India (NSE), the world’s leading derivatives exchange by contract volume in 2023, has received approval from the Securities and Exchange Board of India (SEBI) to launch derivatives on the Nifty Next 50 index (NIFTYNXT50) beginning April 24, 2024.The exchange will provide three consecutive monthly index futures and index options contract cycles. The cash settled derivatives contracts will expire on the final Friday of the expiration month.The Nifty Next 50 Index comprises 50 businesses from the Nifty 100 after eliminating the Nifty 50. As of March 2024, the index’s top sector representation was financial services, with 23.76% weight, followed by capital goods (11.91%) and consumer services (11.57%).
The index was introduced on January 1, 1997, with base date and base value being November 03, 1996, and 1000 respectively. Over the years, the index methodology has undergone revision. The index computation methodology was revised to Free Float Market Capitalisation weighted method from May 4, 2009. Subsequently, weight capping was introduced for constituent stocks on which derivatives were not available. This was revised in 2023 to cumulative weight of non-F&O stocks capped at 10% and non-F&O stocks in the index are individually capped at 4.5% on quarterly rebalance dates.The market capitalization of index constituents stands at Rs 70 trillion representing about 18% of total market capital of the stocks listed on NSE as on March 29, 2024.
The aggregate daily average turnover of index constituents stood at Rs 9,560 crores accounting for around 12% of cash market turnover in FY24.The Nifty Next 50 index has a 71% correlation and a Beta value of 0.95 with the Nifty 50 Index. It has a correlation of 90% with Nifty Midcap 150 index in financial year 2024. In recent years, Exchange had introduced derivatives on Nifty Midcap Select Index (MIDCPNIFTY) in January 2022 and derivatives on Nifty Financial Services index (FINNIFTY) in January 2020 in the equity derivatives segment and multiple products in commodity derivatives segment. The MIDCPNIFTY Derivatives has seen peak at Rs 2,888 crores of futures turnover, 16.7 crores of option contracts traded and option premium turnover of Rs 17,283 crores.
The FINNIFTY Derivatives saw a peak of Rs 1,288 crores in futures turnover, 38.2 crores in option contracts traded, and an option premium turnover of Rs 32,994 crores. In the commodities derivatives category, the Option of WTI Crude Oil Futures reached a high of 1,02,304 contracts. On the occasion, Shri Sriram Krishnan, Chief Business Development Officer, NSE, stated that the introduction of derivatives on the Nifty Next 50 index (NIFTYNXT50) will complement the existing index derivatives product suite. The Nifty Next 50 index will bridge the gap between the Nifty 50 index, which includes the top big and liquid firms, and the Nifty Midcap Select index, which includes the top large and liquid mid-capitalised stocks.”
