NSE introduces derivatives on Nifty Next 50

Nifty Next 50 derivatives: The National Stock Exchange of India (NSE) introduced derivatives on Nifty Next 50 Index (NIFTYNXT50) from today. Securities and Exchange Board of India (SEBI) has approved derivatives on the Nifty Next 50 Index on NSE. Derivative contracts are short-term financial instruments that come with a fixed expiry date. The underlying asset can be stocks, commodities, currencies, indices, exchange rates, or even interest rates.

NSE, the world's No. 1 derivatives exchange in the year 2023 based on contracts traded, will offer three serial monthly index futures and index options contract cycles. The cash-settled derivatives contracts will expire on the last Friday of the expiry month.

According to a study by SEBI (Security and Exchange Board of India) found that 9 out of 10 individual traders lost money in the Future & Option segment of derivatives in 2022, with an average loss of Rs1.1 lakh. The study also found that 90% of active traders lost an average of Rs1.25 lakh.

The Nifty Next 50 Index represents 50 companies from Nifty 100 after excluding the Nifty 50 companies. As on March 2024, the index had top sector representation, the financial services sector has 23.76 per cent weightage followed by the capital goods sector with 11.91 per cent and consumer services sector at 11.57 per cent.

The index was introduced on January 1, 1997, with the base date and base value being November 3, 1996, and 1000 respectively. As on March, 29 2024, the market capitalization of index constituents stands at Rs 70 trillion representing about 18 per cent of the total market capital of the stocks listed on NSE The aggregate daily average turnover of index constituents stood at Rs 9,560 crores accounting for around 12 per cent of cash market turnover in 2023-24.

The Nifty Next 50 index has a 71 per cent correlation and a Beta value of 0.95 with the Nifty 50 Index. It has a correlation of 90 per cent with Nifty Midcap 150 index in financial year 2024. In recent years, NSE has introduced derivatives on Nifty Midcap Select Index (MIDCPNIFTY) in January 2022 and derivatives on the Nifty Financial Services index (FINNIFTY) in January 2020 in the equity derivatives segment and multiple products in the commodity derivatives segment.