BankNifty is an Index that comprises 12 top Banking and NBFC’s (Non-Banking Financial Corporations) which are the most liquid. This Index can be traded in Futures as well as Options. To trade in Futures one needs to have at least 89,000 for 1 LOT of Bank nifty Future for intraday and 1,74,000 approximately for holding on to their position overnight. An individual should have the F&O (Futures & Options) Segment activated in their trading account in order to trade in derivatives. One can hold on to the Futures until the expiry of the Contract.
Bank Nifty-
Bank Nifty is an Index that denotes the Top banking stocks listed in the Indian Stock Exchanges. It comprises of 12 of the Top and Largest companies from the Indian Banking sector listed on the NSE (National Stock Exchange). The Bank Nifty is an Index that denotes only the Indian banking and Non Banking sector unlike Nifty that consists of 50 Stocks from all sectors.
Bank Nifty Futures-
Bank Nifty Futures is a form of derivatives that can be actively traded from any trading account.
Contract Size- The LOT size of Bank Nifty is 25.
To value of a Futures contract can be calculated by the current price of the index multiplied by 25. As of today’s closing the value comes around (34100 *25) = 8,52,500. The margin money required to buy one contract varies from 8-12% from Broker to Broker.
To buy a Futures contract of BankNifty, the process can be followed.
- Firstly one needs to make sure that they have the Derivatives Segment activated in their Trading account by their Stock Broker. The derivatives segment is not activated by default and one has to do it by providing some necessary documents to activate this particular segment. A Bank Statement, Salary slip, Net Worth statement, ITR are some of the documents that are accepted to activate the Derivatives Segment. As trading in derivatives is a risky business, brokers take some proof of income to ensure that the customers have the required risk appetite.
- Once the Derivative Segment is activated in the Trading Account, the second thing to ensure is to Fund the account with adequate capital to but a Futures contract. To buy 1 Lot of Future, for Intraday trades the margin money required is approximately Rs 89,000 and for Overnight positions, the Margin money required is approximately Rs 1,73,000.
- Now that the margin money is kept in the account one has to choose the order type in which they want to buy a Bank Nifty Futures. There are Cover Orders, Bracket orders that come under MIS (Margin Intraday Square off) that have to be squared off within the same day. The margin required in intraday orders is less as compared to Overnight positions.
- After deciding the order type, one has to choose the series of Futures that they want to buy. There are 3 series available in the upcoming months. Hence one can hold on to the Future Contracts till the expiry.
- To buy Bank Nifty Futures, One has to Search for “Banknifty Futures” in the search section in their trading account and chose the month for which they want to buy the futures, and choose the order type and the price at which they want to buy and confirm the order.
By following the above process one can buy Bank Nifty Futures for Intraday trading or for Positional trades. Futures contracts can be gone Long as well as Short as required by traders and investors. One can also reduce the total margin money required to buy a Future by buying a Put option as a hedge and also for availing the Margin benefit given by NSE.