InvestorQ : How do you see the importance of derivative contracts on the Nifty Financial Services Index to be offered shortly?
diksha shah made post

How do you see the importance of derivative contracts on the Nifty Financial Services Index to be offered shortly?

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10 months ago
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At last traders can now participate in an index that goes much beyond banks in the financial services space. In a significant move, NSE will now offer derivate contracts trading on the Nifty Financial Services Index with effect from 11 January 2021. It may be recollected that the NSE offers derivatives index trading only on the Nifty 50 and the Bank Nifty.

While both the Nifty and the Bank Nifty are extremely popular, they also have a shortfall in that a lot of large financial services companies are ignored. That gap will now be made up. The Nifty Financial Services index is a more broad-based index which includes large NBFCs apart from banks; like housing finance companies, insurers, micro lenders etc.

It needs to be remembered that there are 2 NBFCs in the top-10 market value companies. The Nifty Financial Services Index is expected to reflect the financial services industry in India in a more complete way. Incidentally, this index is also huge as it accounts for 33.5% of the total weight on the diversified and broad-based Nifty 500 index.

This index also includes HDFC and Bajaj Finance, apart from banks, and could see the addition of many more important insurance companies like the SBI Life Insurance and HDFC Life Insurance in the broad-based index. Of course, the real game changer could be when LIC eventually comes out with its IPO and gets listed. Its heft could really go up sharply then.

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