NSE to launch F&O in Nifty Junior, CNX-100

The National Stock Exchange (NSE) will begin futures and options (F&O) trading in CNX Nifty Junior and CNX-100 indices from June 1, providing two more hedging tools for investors to bet on mid-caps.

The NSE hopes to add significant volumes by introducing F&O in the two broader indices after derivatives trading in its two sectoral indices, CNX-IT and Bank Nifty failed to bring in big volumes even 3-4 years after its F&O launch.

The new products will also help the NSE tighten its hold over derivatives trading as broadbased indices are more popular globally vis-a-vis sectoral indices, say market players.

Currently, index-based derivatives are available on S&P CNX Nifty, CNX-IT and Bank Nifty indices. The average daily turnover of these three products alone constitutes about Rs 10,500 crore, nearly a third of the total daily turnover of about Rs 30,000-odd crore from the F&O segment. Of the Rs 10,500-odd daily turnover in index derivatives, a big share comes from Nifty index derivatives and only a marginal share from CNX IT and Bankex.

"The introduction of CNX Nifty Junior and CNX 100 indices will give an opportunity to the retail investors to hedge their positions in mid-cap stocks," said Subash Gangadharan, head of derivatives and technicals (retail) at HDFC Securities.

Foreign institutional investors, which are developing a fancy for mid-cap stocks, will also find the two new products helpful, he explains.

Derivatives trading in sectoral indices, CNX-IT (launched in 2003) and Bank Nifty (in 2005) are not bringing in big volumes. For instance, the daily F&O turnover in CNX-IT index is less than Rs 6 crore, while for the Bank Nifty it is about Rs 90 crore. This is in contrast to the widely popular Nifty Index, where average daily volumes is about Rs 10,400 odd crore.

"This is not an Indian phenomenon. Globally too, derivatives in sectoral indices are not very popular. That is the reason why we are now introducing products based on broader indices," said an official in NSE's F&O segment. "Investors prefer to bet on broader indices than sectoral indices," he said.