After receiving SEBI nod, the National Stock Exchange of India (NSE) has started derivatives on Nifty Next 50 Index from Wednesday.
What are derivative contracts?
Derivative contracts are short-term financial instruments with a fixed expiry date. The underlying asset can be stocks, indices, currencies or commodities.
Under the contract, the NSE would offer three serial monthly index futures and index options contract cycles. The cash-settled derivative contracts would expire on the last Friday of the given expiry month.
The launch of derivatives in the Nifty Next 50 index would complement the existing index derivatives product suite. NSE is the largest derivatives exchange if the number of contracts traded in taken into consideration, as per 2023 data.
What is Nifty Next 50 index?
For the unversed, Nifty Next 50 index, introduced in January 1997, comprises 50 companies in Nifty 100 excluding those in Nifty 50 club. It represents the space between the Nifty 50 index and the Nifty Midcap Select Index.
The market capitalisation of Nifty Next 50 companies was valued at around Rs 70 trillion in the quarter ending March 2024. This would represent nearly 18 per cent of the total market cap of the NSE-listed stocks.
Financial services is the top sector in the Nifty Next 50 index constituting 23.76 per cent, followed by capital goods sector at 11.91 per cent and consumer services at 11.57 per cent.
