The markets regulator formally revising criteria for the exit and entry of stocks in the futures and options (F&O) market could open doors for 79 popular names such as Life Insurance Corporation of India, Paytm, DMart, Jio Financial Services, and Zomato. At the same time, 18 stocks risk being dropped from the current list of 182 if they fail to meet the criteria over the next three months.
The new entrants and exclusions will play a crucial role in the makeup of key benchmark indices such as the National Stock Exchange’s Nifty 50 and BSE’s Sensex, which only includes F&O stocks. According to estimates by Nuvama Alternative & Quantitative Research, the new inclusions could propel companies like Zomato and Jio Financial into the benchmark Nifty 50 index, potentially as early as the March 2025 Nifty 50 review, pending the final list by the regulator.
“As our markets have evolved, the call for adding more F&O stocks with robust liquidity has grown louder, while the need to weed out underperforming names with poor liquidity has become increasingly apparent,” said Abhilash Pagaria, head of Nuvama Alternative & Quantitative Research.
Stocks facing potential exclusion include Syngene, United Breweries (UBL), Abbott India, Metropolis Health, Gujarat Gas, Can Fin Homes, City Union Bank, Sun TV Network, Ipca Laboratories, Granules India, Mahanagar Gas, Bata India, IDFC, and Dr Lal Pathlabs.
The earliest review of these exclusions could occur in December, with any removals taking effect in February 2025 or later.
New entrants to the F&O list could include market intermediaries such as BSE, Central Depository Services, Angel One, Computer Age Management Services, and new-age companies like PolicyBazaar parent PB Fintech, Nykaa, Delhivery, and Paytm parent One97 Communications.
Meanwhile, three Adani Group companies–Adani Green Energy, Adani Energy Solutions and Adani Total Gas, are eligible for entry into the derivatives segment.
Eligibility for entry into the derivatives segment is based on performance in the cash market over the previous six months on a rolling basis. Stocks that fail to meet the new criteria for three consecutive months will be removed from the segment.
Among the stocks facing possible exits, five are part of the Nifty 200 index and Nifty Midcap 150, while eight belong to the Nifty Smallcap 250 index. Some potential entrants are already part of the Nifty Next 50 as well as midcap and smallcap indices.
The Securities and Exchange Board of India’s (Sebi’s) revised eligibility criteria marks the first major update in nearly six years. The regulator has increased the market-wide position limit (MWPL), median quarter-sigma order size (MQSOS), and average daily delivery value in the cash market.
Additionally, Sebi has introduced a product success framework (PSF) for the exit of single-stock derivatives, similar to the one used for index derivatives. However, exclusions based on this new framework are expected to take at least 8 to 9 months, according to Nuvama.