Bank Nifty expiry shift to Friday will increase volumes and bring down the volatility in Nifty on Thursday’s, analysts

National Stock Exchange of India’s (NSE) move to shift the weekly futures and options (F&O) expiry of Nifty Bank contracts to Friday from Thursday, effective July 14, will increase volumes in the index, bring down the volatility in Nifty on Thursday’s and help traders allocate margins effectively, said analysts.

“The change would bring more participation, and participants can use the same margin money on Friday for Bank Nifty which they use for Thursday on Nifty and Bank Nifty,” said Chandan Taparia, analyst, Motilal Oswal Financial Services. “Bank Nifty weekly expiry started with the objective that one can hedge the weekly risk or mitigate the volatility due to RBI policy and FED meeting, which usually happens on Wednesday. But now participants need to have a position for two days to hedge with the current weekly expiry of Bank Nifty if the expiry happens on Friday.”

With this change, NSE will now have four weekly expiries -- Fin Nifty on Tuesday, Midcap Nifty on Wednesday, Nifty on Thursday, and Bank Nifty on Friday.

“NSE’s decision should help bring in better trader focus on each index and boost overall volumes in the two most popular indices in the derivative segment,” said Jay Thakkar, head of alternate research, Sharekhan. “Additionally, it would also be in sync with the expiry on Friday done by BSE.”

Earlier, BSE changed its monthly, weekly, and long-dated futures and options contracts expiry to Fridays from Thursdays and tweaked the lot size. Last Friday, BSE’s derivatives segment recorded an impressive turnover of Rs 69,422 crores, compared to almost nil a few months back. However, from the investor-trader’s perspective, analysts say NSE is still placed better in market share than BSE and hence, is most likely to continue its dominance.

“To counter BSE’s move of tweaking the lot size and expiry day of options contracts which had gained popularity due to low charges, NSE has revised the Bank Nifty weekly expiry to Friday of every week,” said Rajesh Malviya, SVP - technical and derivatives research, Axis Securities. “The volatility, particularly in Nifty, is expected to come down by roughly 20% -22% as the components of Bank Nifty will be more active on Friday's expiry than Thursday's weekly expiry.”