We all know derivatives of NIFTY 50 and BANK NIFTY are actively trading and many of us are doing index futures and options frequently. NSE recently announced good news for index derivatives traders. from 11th January 2021, one more index is allowing us derivative trading. in this post, we will discuss the Nifty financial services derivatives and their features.
Nifty Financial Services-FINNIFTY
FINNIFTY is the first index derivatives with a weekly futures contract along with weekly options.
| Name | NIFTY FINANCIAL SERVICES |
| Symbol | FINNIFTY |
| Lot Size | 40 |
| Expiry | Weekly (Thursday) |
| Derivatives | Future and Options |
| NIFTY Lot size | 75 |
| BANKNIFTY Lot size | 25 |
“NSE has received approval from SEBI to launch derivatives on the Nifty Financial Services Index in the futures & options segment of the Exchange. Currently, NSE offers index derivatives on only two equity indices – The Nifty50 index and the Nifty Bank index,” The exchange will offer futures and options in 7 serial weekly, excluding the monthly expiry and 3 serial monthly contracts, NSE said.
“This is the first time that the Exchange will make available weekly futures for the stock index derivatives. The derivatives are cash-settled with expiry day being the last Thursday of the expiry month for the monthly contracts and Thursday of the expiring week for weekly expiry contracts,” NSE said. The option contracts are European styled Call Option (CE) and Put Option (PE) with strike scheme of 30-1-30 and strike interval of 100, said the exchange.
NSE underscored that recent investment data of Foreign Portfolio Investors (FPIs) indicates 48 percent of new investment flows were into the financial services sector. The sector accounted for 35 percent of the assets under the custody of FPIs. Many of the asset management companies have mutual fund schemes in the financial sector theme. The Nifty Financial Services index has a 94 percent correlation and a beta value of 1.2 with the Nifty50 index. It has a correlation of 98 percent with the Nifty Bank index.
Also read: What is a stock market index? Types of Indices?
Stocks
The financial services sector assumes significance as the sector accounts for 33.5 percent of the Nifty500 index. The Nifty Financial Services index comprises 20 stocks and is designed to reflect the behavior and performance of the Indian financial market which includes banks, financial institutions, housing finance, insurance companies, and other financial services companies, As opposed to the Bank Nifty, which comprises 12 banking stocks, the financial services index comprises 20 stocks from the banking, NBFC, HFC, insurance, asset management, holding company, and other financial services spaces. Given the high weightage of banking stocks, the Nifty Financial Services has a correlation of 98 percent with the Nifty Bank index. The Nifty Financial Services has delivered annualized returns of 15 percent in the last five years, NSE said.
| Sl no | Stocks |
| 1 | AXIS Bank Ltd |
| 2 | Bajaj Finance Ltd |
| 3 | Bajaj Finserv Ltd |
| 4 | Bajaj Holdings and Investment Ltd |
| 5 | Cholamandalam Investment and Finance Company Ltd |
| 6 | HDFC Asset Management Company Ltd |
| 7 | HDFC Bank Ltd |
| 8 | HDFC Life Insurance Company Ltd |
| 9 | Housing Development Finance Corporation Ltd |
| 10 | ICICI Bank Ltd |
| 11 | ICICI Lombard General Insurance Company Ltd |
| 12 | ICICI Prudential Life Insurance Company Ltd |
| 13 | Kotak Mahindra Bank Ltd |
| 14 | Mahindra and Mahindra Financial Services Ltd |
| 15 | Piramal Enterprises Ltd |
| 16 | Power Finance Corporation Ltd |
| 17 | REC Ltd |
| 18 | State Bank Of India |
| 19 | SBI Life Insurance Company Ltd |
| 20 | Shriram Transport Finance Co. Ltd |
Weightage
The Nifty Financial Services comprises 20 stocks from banks, NBFC, and insurance sectors. Top weights are HDFC Bank, HDFC, ICICI Bank, and Kotak Mahindra Bank. Following is the major weightage of stocks in the NIFTY FINANCIAL SERVICES INDEX.
| Stocks | Weightage(%) |
| HDFC Bank Ltd | 27.13 |
| Housing Development Finance Corporation | 17.51 |
| ICICI Bank Ltd | 14.14 |
| Kotak Mahindra Bank Ltd | 12.10 |
| Axis Bank Ltd | 6.46 |
| Bajaj Finance Ltd | 5.64 |
| State Bank of India | 4.06 |
| Bajaj Finserve Ltd | 2.29 |
| HDFC Life Insurance Company Ltd | 2.21 |
| SBI Life Insurance Company Ltd | 1.43 |
Final Thoughts
One more INDEX is entered to Future and options trading after NIFTY and BANK NIFTY. this time it is NIFTY FINANCIAL SERVICES. It is the first index derivatives with a weekly future’s contract along with weekly options. Index future and option traders got another exciting trading option after nifty and bank nifty. in this post, we discussed FINNIFTY and its details. I hope this post will give you an idea about the new index derivatives.
Happy trading