45 new stocks in F&O segment expected to trigger churn in Nifty, Sensex

LIC, Zomato, Dmart among largest firms in the list of 45 stocks

The National Stock Exchange (NSE) has announced the inclusion of 45 new stocks in the futures and options (F&O) segment, effective November 29. This marks the first expansion in the derivatives segment since January 2022, expected to trigger churns in several benchmark indices, including the NSE’s Nifty 50 and the S&P BSE Sensex.

 

Among the new entries, the largest by market capitalisation are Life Insurance Corporation of India, Avenue Supermarts (DMart), Adani Green Energy, Zomato, and Jio Financial Services.

 

Despite meeting size criteria, some stocks have been excluded from the Nifty and Sensex due to a lack of derivatives inclusion. However, with this hurdle now removed, the question of their index inclusion shifts from ‘if’ to ‘when’.

 

Brian Freitas, an analyst at Periscope Analytics and contributor to Smartkarma, notes that the Sensex is unlikely to see adjustments in its December rebalance unless the review committee considers the newly added F&O stocks. The Sensex’s next rebalancing announcement is scheduled for mid-December, though the review period closed on October 31.

 

“If the 45 stocks are added to the index universe, Zomato could replace JSW Steel in the Sensex in December,” says Freitas. “If Zomato is not added in December, inclusion by June seems likely. Trent also emerges as a possible inclusion for the index in June,” he adds. 

 

Meanwhile, the next Nifty rebalance is set for March 2025, with a review period from August 1 to January 31.

 

“With these new F&O inclusions, Zomato and Jio Financial Services could enter the index, leading to the exclusion of Bharat Petroleum Corporation (BPCL) and Eicher Motors,” Freitas observes.

 

The Nifty inclusions are expected to drive passive buying of around Rs 6,610 crore in Zomato and Rs 4,151 crore in Jio Financial. In comparison, BPCL and Eicher Motors could see passive outflows of Rs 2,538 crore and Rs 2,672 crore, respectively.

 

The newly added F&O stocks are expected to outperform, motivated by the potential index inclusion and the derivatives segment’s growth, which is regarded as a strong positive driver.

 

“We analysed the stock performance of F&O additions since 2015. Results show that 70 per cent of these stocks delivered positive returns from the announcement date to the inclusion date,” says Sriram Velayudhan, senior vice-president at IIFL Alternative Research.

 

The inclusion of new stocks in the F&O segment follows the tightening of entry criteria by the market regulator, Securities and Exchange Board of India (Sebi). The revised framework aims to attract more liquid and high-quality names to the derivatives market, with Sebi mandating higher thresholds for market-wide position limits, median quarter sigma order size, and average daily delivery value in the cash market.

 

This addition also comes as Sebi raises concerns over mounting retail losses in the derivatives segment.

 

A recent study by Sebi revealed that the aggregate losses of 11.3 million retail traders exceeded Rs 1.8 trillion over three years, from 2021-22 to 2023-24 (FY24). In FY24 alone, individual traders incurred roughly Rs 75,000 crore in net losses, with 93 per cent of retail traders losing money on F&O trades over the past three years.