What is Bank NIFTY?

Author : sona verma | Published On : 16 Sep 2021

The Bank NIFTY Index are the most liquid bank on the National Stock Exchange (NSE). The Bank NIFTY Index includes 12 significant public and private banks publicly traded on the NSE.

A brief history

Private sector banks dominate Bank NIFTY, with only a few public sector banks making the cut. This could be because private sector banks, unlike the public sector, are modernised and technologically suited to meet the demands of today's banking system. As a result, trade activity in private sector banks has increased.

How does weightage get decided in Bank NIFTY?

Simply defined, the weighting of banks in the Bank NIFTY Index gets entirely decided by their free-float market capitalisation. The full capitalisation method is not the same as the free-float market. It generally refers to the market value of the total number of shares actively trading at the exchange, excluding promoter holdings, government, and insiders.

Trading Bank Nifty Futures

A Futures contract is a forward with a predetermined expiration date that gets rolled over to the next contract. Bank NIFTY Futures are derivatives whose value gets derived from the Bank NIFTY Index.

Three contracts for the Bank NIFTY Futures market are active at the same time. The first month (near one), the second month (two-month contract), and the third month (four-month contract) (three months). Check the Bank NIFTY chart to understand the market.

A new far month contract gets introduced after the near month contract ends. So, there are three active contracts in Bank NIFTY Futures at any given time. Every month, the Bank NIFTY Futures contract expires on the last working Thursday or the day before, if the last working Thursday is a holiday.

Trading Bank Nifty Options

Options are the buyer's contractual rights (not obligations) and the option seller's compulsory duty. Bank NIFTY Options contracts get settled in cash. The value of Bank NIFTY Options contracts gets derived from the Bank NIFTY Index (Underlying asset).

The Bank NIFTY Options contract, like the Futures contract, has three monthly contracts. Once the near-month contract expires, a new far-month contract gets added. The Bank NIFTY includes seven weekly contracts that are to expire. A new serial weekly contract gets introduced when the previous week's contract expires.

The weekly expiry contract ends on Thursday of each week unless Thursday is a holiday, in which case the contract expires the day before. Similarly, the monthly Bank NIFTY options contract expires every month on the last Thursday, and if the final Thursday is a holiday, the contract expires the day before.

It infers that you can use the banking's economic system to determine the overall health. The Bank NIFTY technical analysis helps to understand it better. The Bank NIFTY Options contract, which has a series of weekly and monthly expiry contracts, makes up most of the Indian Options market.