NSE to launch derivatives on Nifty Next 50 index from April 24

New Delhi: The National Stock Exchange (NSE) on Thursday said it will introduce derivative contracts on Nifty Next 50 index from April 24.

The Nifty Next 50 index represents 50 companies from Nifty 100 after excluding the Nifty 50 companies.

In a statement, NSE said it "has received approval for derivatives on Nifty Next 50 index from the Securities and Exchange Board of India (Sebi) and will launch these contracts from April 24, 2024".

The exchange 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.

"The introduction of derivatives on the Nifty Next 50 index will complement the existing index derivatives product suite. The Nifty Next 50 index will represent the space between the Nifty 50 index comprising the top large & liquid stocks and the Nifty Midcap Select index comprising the top large & liquid mid-capitalised stocks," Sriram Krishnan, Chief Business Development Officer at NSE, said.

As of March 2024, the index had top sector representation from the financial services sector with 23.76 per cent weight followed by the capital goods sector with 11.91 per cent and consumer services with 11.57 per cent. The index was introduced on January 1, 1997.

The market capitalisation of Nifty Next 50 index constituents stands at Rs 70 trillion representing about 18 per cent of the 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 crore accounting for around 12 per cent of cash market turnover in FY24.

Earlier, the exchange introduced derivatives on Nifty Financial Services index in January 2020 and derivatives on Nifty Midcap Select index in January 2022 and multiple products in the commodity derivatives segment in October 2023.

Derivatives in market parlance refer to financial contracts between two or more parties and derive their value from an underlying asset or benchmark.

Broadly, there are two types of derivative contracts -- futures and options. A futures contract means a legally binding agreement to buy or sell the underlying security on a future date, while an options contract gives the buyer or holder of the contract the right (but not the obligation) to buy or sell the underlying asset at a predetermined price within or at the end of a specified period.