In a strategic move aimed at broadening investment opportunities, the National Stock Exchange (NSE) is set to unveil derivatives tied to its popular Nifty Next 50 index, effective April 24, 2024. This development comes after securing the green light from the Securities and Exchange Board of India (SEBI), marking a significant milestone for the exchange.

According to disclosures made by the exchange, NSE will roll out a series of three serial monthly index futures and index options contracts. These cash-settled derivatives will reach maturity on the last Friday of each expiry month, offering traders and investors a structured approach to managing risk and optimizing their portfolios.

Sriram Krishnan, NSE's Chief Business Development Officer, underscored the strategic importance of this move, highlighting how the introduction of derivatives on the Nifty Next 50 index will complement the existing suite of index derivatives products. The Nifty Next 50 index occupies a unique space in the market ecosystem, bridging the gap between the Nifty 50 index, which comprises top large-cap stocks, and the Nifty Midcap Select index, which focuses on mid-cap stocks with significant liquidity.

Comprised of 50 companies from the Nifty 100, excluding those in the Nifty 50, the Nifty Next 50 index, also known as Junior Nifty, mirrors a diverse range of sectors. As of March 2024, the financial services sector held the largest weight in the index at 23.76 percent, followed by capital goods at 11.91 percent, and consumer services at 11.57 percent.

The index, launched on January 1, 1997, with a base value of 1000, has since evolved into a key benchmark for investors seeking exposure beyond the Nifty 50 universe. Its market capitalization, totaling Rs 70 trillion as of March 29, 2024, accounts for approximately 18 percent of the total market capitalization of stocks listed on NSE. Moreover, the constituents of the index boast an aggregate daily average turnover of Rs 9,560 crores, contributing around 12 percent to the cash market turnover in FY24.

Overall, the introduction of derivatives on the Nifty Next 50 index represents a strategic move by NSE to cater to the evolving needs of market participants, offering them enhanced opportunities for diversification and risk management in an ever-changing market landscape.