Jio Financial, Zomato likely to be included in Nifty50 under new F&O rules: Nuvama

With the market regulator SEBI approving revisions in the eligibility criteria for the entry and exit of stocks in the derivatives market, Jio Financial Services and Zomato now have strong prospects of joining the blue-chip Nifty50 index, according to a report by Nuvama Alternative & Quantitative Research Analysis.

Abhilash Pagaria, head of Nuvama Alternative & Quantitative Research Analysis, stated in a recent note that if Jio Financial and Zomato enter the derivatives segment before mid-August, they are highly likely to join the Nifty 50 in the September review, along withTrent.

According to Pagaria, if included in the Nifty 50, Jio Financial could attract $466 million in passive fund buying, Zomato $491 million, and Trent $463 million.

The Securities and Exchange Board of India (SEBI) has implemented significant changes in equity derivatives regulations, affecting stock selection for futures & options (F&O).

Key changes include raising the average daily delivery value requirement for a stock to qualify for the F&O segment to ₹35 crore (up from ₹10 crore) in the cash market over the past six months, and increasing the market-wide position limit to at least ₹1500 crore (up from ₹500 crore).

SEBI has introduced a product success framework to curb market manipulation through illiquid securities. If trading volumes remain low over six months, the derivatives will be discontinued. These changes aim to strengthen the linkage between cash and F&O markets and enhance investor protection.

SEBI's decision to revise F&O stock selection criteria addresses concerns about the inclusion of illiquid stocks. This follows a discussion paper highlighting the risks of market manipulation and volatility without sufficient cash market depth and appropriate position limits.

The previous review was in 2018, and since then, market capitalization and turnover have increased significantly. Currently, NSE and BSE lead globally in F&O volume, with over 80 percent of global turnover in April. NSE traded 8,484 million contracts, the highest globally, while BSE saw 2,224 million contracts. NSE's year-on-year growth was 92 percent, while BSE's F&O trading has surged since May last year.