NSE Cites Broad-Based Participation For Nifty Lot Size Halving

These changes are part of the stipulated regulations and are carried out routinely. Revisions were carried out in 2020, 2021 and 2023.

<div class="paragraphs"><p>Inside NSE headquarters in Mumbai. (Source: Vijay Sartape/NDTV Profit)</p></div>
Inside NSE headquarters in Mumbai. (Source: Vijay Sartape/NDTV Profit)

The rationale behind the National Stock Exchange's decision to slash the lot sizes of select derivatives contracts was to drive participation of retail investors.

The minimum prescribed value of Rs 5 lakh makes participation more broad-based, according to Sriram Krishnan, Business Development Officer at NSE. "Affordability is an important consideration from any derivatives standpoint."

"The risk management framework we have in place is one of the finest in the world," he said. More than risk management, what NSE is looking at here is making sure that the contract value does not become too high, like in the case of the Nifty 50 value, Krishnan said.

On Tuesday, the NSE revised the lot for the Nifty 50 to 25 from 50. For Nifty Financial Services, the lot was reduced to 25 from 40, and for the Nifty Midcap Select, it was slashed to 50 from 75. The market lot of the Nifty Bank remains unchanged at 15.

These changes are part of the stipulated regulations and are carried out routinely, according to Krishnan. "We have carried out such revisions in 2020, 2021, and 2023."

Nifty 50 contract value had gone beyond Rs 10 lakh to 11.22 lakh, and Nifty Financial Services and Nifty Mid Cap are significantly above Rs 5 lakh at Rs 8.5 lakh and around Rs 8 lakh, respectively, Krishnan said.

"Wherever possible, we have passed on the benefits of scale to the investors and ecosystem," Krishnan said.

The changes are part of a periodic review of lot sizes in derivatives contracts and will come into effect from April 26. All new contracts generated from the end of the day of April 25 and available for trading from April 26 will have the revised market lot size.

Why NSE Revised Lot Size Of Nifty 50 Contracts | Profit Explains