Nifty99000 100%

Sensex99000 100%


NSE May Add 11 Stocks To F&O Space

Author: Dasari Sreenivasa Rao/Wednesday, July 22, 2020/Categories: Exclusive

Rate this article:
No rating
NSE May Add 11 Stocks To F&O Space

The derivatives space on NSE will swell once the world’s largest derivatives exchange, in terms of contracts traded, adds 11 more stocks to the futures and options (F&O) platform. Stocks such as Adani Gas, HDFC AMC, ICICI General Insurance, L&T Info, Pfizer are among those 11 companies, which are qualified for the inclusion in F&O category, according to a latest report from ICICI It may be recalled that Sebi on April 22, 2019, announced a decision to exclude 34 stocks from F&O segment from July series onwards for not meeting the enhanced eligibility criteria. After this, as many as 175 securities, as on August 2019, were trading on F&O platform. In its immediate last F&O inclusion in April, 2020, NSE included SBI Life Insurance. Prior to that, three new stocks were added in F&O in February 2020 after a gap of almost two years.

Based parameters such as average daily market capitalisation and average daily traded value in the previous six months on a rolling basis and also the stock’s median quarter-sigma order size over the last six months shall not be less than Rs 25 lakh, NSE will take a decision on exclusion or inclusion of stocks from the top 500 stocks for F&O platform.

The eligibility of a stock for inclusion in the derivatives segment is based on the criteria laid down by the market regulator Securities and Exchange Board of India (Sebi) through various circulars issued from time to time. Based on the Sebi guidelines, F&O contracts would be introduced. F&O contracts may be introduced on new securities, which meet the below mentioned eligibility criteria, however, subject to approval by Sebi.

Eligibility criterion

1) The stock shall be chosen from among the top-500 stocks in terms of average daily market capitalization and average daily traded value in the previous six months on a rolling basis.

2) The stock’s median quarter-sigma order size over the last six months shall not be less than Rs25 lakh. For this purpose, a stock’s quarter-sigma order size shall mean the order size (in value terms) required to cause a change in the stock price equal to one-quarter of a standard deviation.

3) The market wide position limit in the stock shall not be less than Rs 500 crore on a rolling basis. The market wide position limit (number of shares) shall be valued taking the closing price of stocks in the underlying cash market on the date of expiry of contract in the month. The market wide position limit of open positions (in terms of the number of underlying stock) on futures and option contracts on a particular underlying stock shall be 20 per cent of the number of shares held by non-promoters in the relevant underlying security i.e. free-float holding.

4) Average daily delivery value in cash market shall not be less than Rs10 crore in the previous six months on a rolling basis. The average daily deliverable value shall be computed taking deliverable quantity as per client level as computed by NSE Clearing Ltd on a daily basis and close price of the trade date.

The exclusion and inclusion is part of normal exercise taken up by NSE from time to time. With a sole objective of investor protection, NSE takes decision based on liquidity levels that stipulates the eligibility for inclusion in the derivatives segment. The exclusion may lead to short-term unwinding of arbitrage trades.

Considering the last six month’s average criteria of NSE parameters, ICICI short listed certain stocks for fresh inclusion in the F&O segment. Hence, from a data perspective, ICICI has identified the following 11 stocks that qualify for F&O inclusion. A few stocks from this list may be included in the next forthcoming announcement.

According to a Sebi circular released in 2018 on review of framework for stocks in derivatives segment, “after a period of one year from the date of the circular, only those stocks which meet the enhanced eligibility criteria shall remain in derivatives segment.”

Popular stocks such as Allahabad Bank, Syndicate Bank, Jet Airways, CG Power and Industrial Solutions, Suzlon Energy, IDFC Ltd and Wockhardt among others excluded from the F&O segment.

Generally, price bands or circuit filters are generally not applied to the F&O stocks as derivatives markets reflect expectation of spot prices in the future. However, the capital markets regulator earlier proposed to fix circuit filters or price bands on F&O scrips to curb excessive volatility.

In a discussion paper on ‘Applicability of Individual Scrip wise Price Bands or Circuit Filters’ on F&O scrips, Sebi said: “Concerns have been raised that investors’ wealth is getting wiped out in a single day by recent falls in stocks, on which derivative products are available, as no price bands or circuit filters are applicable on them. In view of recent abnormal intra-day price movements, suggestions are being made to review the rules to prevent such extraordinary price movements.”

The writer is a business journalist with 27 years of experience


Number of views (287)/Comments (0)

Leave a comment

Add comment



Ask the Finapolis.

I'm not a robot
Dharmendra Satpathy
Col. Sanjeev Govila (retd)
Hum Fauji Investments
The Finapolis' expert answers your queries on investments, taxation and personal finance. Want advice? Submit your Question above



The technical studies / analysis discussed here can be at odds with our fundamental views / analysis. The information and views presented in this report are prepared by Karvy Consultants Limited. The information contained herein is based on our analysis and upon sources that we consider reliable. We, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and we are not responsible for any loss incurred based upon it. The investments discussed or recommended in this report may not be suitable for all investors. Investors must make their own investment decisions based on their specific investment objectives and financial position and using such independent advice, as they believe necessary. While acting upon any information or analysis mentioned in this report, investors may please note that neither Karvy nor Karvy Consultants nor any person connected with any associate companies of Karvy accepts any liability arising from the use of this information and views mentioned in this document. The author, directors and other employees of Karvy and its affiliates may hold long or short positions in the above mentioned companies from time to time. Every employee of Karvy and its associate companies is required to disclose his/her individual stock holdings and details of trades, if any, that they undertake. The team rendering corporate analysis and investment recommendations are restricted in purchasing/selling of shares or other securities till such a time this recommendation has either been displayed or has been forwarded to clients of Karvy. All employees are further restricted to place orders only through Karvy Consultants Ltd. This report is intended for a restricted audience and we are not soliciting any action based on it. Neither the information nor any opinion expressed herein constitutes an offer or an invitation to make an offer, to buy or sell any securities, or any options, futures or other derivatives related to such securities.

Subscribe For Free

Get the e-paper free