What to expect after Nifty F&O lot size cut to 25?

“Lot size has reduced for Fin Nifty as well and we have noticed in last couple of months that Fin Nifty activity also started to rise. So, ultimately as per the exchange rule, they try to maintain the contract value near 5 lakhs,” says Chandan Taparia, Motilal Oswal.



Just wanted to start off by getting in your take as to what exactly the outlook is on the back of Fin Nifty and the Mid Cap Nifty lot sizes being cut.

So, like as per recent circular, NSE has announced a revision of market lot size for key indices. So, as of now the Nifty lot size was 50 and that is going to revise downward to 25.

So, according to the recent size, the value of Nifty for one contract goes to around 11 lakh if I consider Nifty at 22,500 with lot size of 50. But now as per the recent circular, the lot size will change to 25 and this will be applicable from 26th of April and the expiry which is going to happen on 2nd of May for weekly will be having the revised lot size and monthly it will be 30th May.

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So, now what is going to affect? I do not think it is going to be affect major. But yes, those who are having less capital, those who want to be in the market with lesser risk, they can participate because otherwise minimum quantity for Nifty is 50 but that will reduce to 25.

So, there are many retail traders, those who want to trade but do not want to take more risk, they can also participate.

But those who are trading in bulk, no need to worry, they can just multiple with 25 compared to right now where the multiple is 50. Now talking about the Fin Nifty, as of now the Fin Nifty lot size was 50 and accordingly, the lot value for one contract goes around 8,50,000 but that will reduce to 25.

Lot size has reduced for Fin Nifty as well and we have noticed in last couple of months that Fin Nifty activity also started to rise. So, ultimately as per the exchange rule, they try to maintain the contract value near 5 lakhs. So, this is a step to do the same and again I believe this is also for some competitions because nowadays we have noticed that BSE derivatives is quite active and Sensex expiry happens on every Friday and lot size for Sensex is 15.

So, comparatively the contract value of Sensex is lower than the Nifty. So, I think that is also for competition, that is also for more retail participation and again this is for, as per the rule of keeping the derivatives contract value to 5 lakh rupees.

So, I think all this happens. I do not see any major change in the market sentiment, but good for retail participation.

But it also makes its contracts significantly cheaper than the Sensex options contracts, right?

Yes, that is and again why I comment on the same because couple of days back, NSE revised or reduced their transaction charges and nowadays we see huge attraction in BSE derivatives, so that is also a reason As of now the Sensex lot size is 15 and if I take the current price, the value for Sensex contract is lower than the Nifty contracts. So, if I consider Sensex at 75,000, the value comes near to 10,80,000 or 10,50,000. So, now I think BSE will also try to change the lot size as well, I assume the same.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)

Harry Byrne

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