NSE Adds 6 New Stocks to F&O Segment Starting January 31

The National Stock Exchange of India (NSE) has announced the inclusion of six new securities in the Futures and Options (F&O) segment, effective from January 31, 2025. The stocks being added are Castrol India, Gland Pharma, NBCC, Phoenix, Solar Industries India, and Torrent Power.

The NSE confirmed that the selection of these securities adheres to the guidelines set by the Securities and Exchange Board of India (SEBI) and that regulatory approval has been granted. Additionally, the exchange stated that details regarding the market lot size and the strike price scheme for these securities will be shared with members via a circular on January 30, 2025. Information about the applicable quantity freeze will also be provided in the contract file for trading on January 31, 2025.

In contrast, the exchange will be removing 16 stocks from the F&O segment as of February 28, 2025. No contracts for these stocks will be available for trading beyond this date. The stocks set to be excluded are PVR Inox, United Breweries, Abbott India, Atul, Bata India, Can Fin Homes, Coromandel International, City Union Bank, Gujarat Narmada Valley Fertilizers and Chemicals, Gujarat Gas, IndiaMart Intermesh, IPCA Laboratories, Dr. Lal Path Labs, Metropolis Healthcare, Navin Fluorine International, and Sun TV Network.

The addition and removal of stocks in the derivatives segment are significant events for investors and traders, as these changes directly impact trading strategies and stock liquidity. Inclusion in the F&O segment typically leads to increased trading volumes for the underlying stocks due to the availability of hedging instruments and speculative opportunities. It also improves price discovery, as market participants gain the ability to express directional views using futures and options contracts.

Conversely, the exclusion of stocks from the F&O segment can temporarily reduce investor interest in those securities as the absence of derivatives limits opportunities for leveraged trades and short positions. Companies that are removed may witness reduced liquidity and price volatility in the short term. However, analysts believe that the exclusion of stocks is generally based on falling liquidity or size metrics that no longer align with regulatory criteria.

In November 2024, the NSE had introduced F&O contracts for 45 stocks, including Life Insurance Corporation (LIC), Jio Financial Services, Adani Energy Solutions, Adani Green Energy, Nykaa, Paytm, YES Bank, and Zomato. This expansion was aimed at meeting market demand for more hedging instruments amid increased market participation. Notably, many of the newly added stocks represented key sectors such as finance, renewable energy, and consumer services, signaling the NSE’s focus on diversifying available derivatives.

Market experts have pointed out that the NSE’s periodic review of the F&O list is essential for maintaining an efficient market environment. By ensuring that only liquid and sizeable stocks remain in the segment, the exchange aims to balance market risks while catering to investor demand for a wide range of derivatives. NSE MD and CEO Ashish Chauhan highlighted that the inclusion process is data-driven, with stocks only being added after they meet established liquidity and size thresholds.

The derivatives market in India has grown substantially in recent years, with both retail and institutional participation on the rise. The introduction of additional contracts is seen as a positive development for market growth, as it provides investors with more instruments for portfolio diversification and risk management. However, some experts have cautioned that the high number of stocks added in recent years reflects increased volatility in the market, urging investors to carefully assess market conditions before trading in the F&O segment.

As the effective dates approach, market participants will closely monitor the performance of the included and excluded stocks, particularly in terms of liquidity and price movements. The NSE’s announcement underscores its role in adapting the F&O framework to align with market trends and regulatory standards while continuing to support market stability and investor confidence.