New kid in D-town: Nifty Financial Services sees steady growth, shows data

The Nifty Financial Services index (Fin Nifty) is slowly gaining traction among derivatives traders. 

Since its launch in January this year, the average daily turnover (ADTV) for Fin Nifty contracts have grown each month.

ADTV has crossed Rs 100 crore on more than one occasion. It has recorded the highest-ever daily turnover of more than Rs 200 crore. 

Fin Nifty ADTV is still a fraction of the flagship Nifty and Bank Nifty indices, which have clocked an ADTV of Rs 40,000 crore this year. 

However, derivatives players see potential in the newly-introduced index on financial stocks, which account for a third of the NSE 500 market cap.
 

They say the Fin Nifty index can be used for various derivative strategies around the more-popular Bank Nifty index.

For instance, someone wanting to go long only financial services stocks can short the Bank Nifty and long Fin Nifty. This strategy helps take out the banking sector exposure. 

In recent months, banking stocks have seen more selling pressure due to high foreign portfolio investor (FPI) concentration.

Fin Nifty has more than 80 per cent correlation to the Bank Nifty index, given similar underlying components.

In addition to banks, Fin Nifty has insurance, mutual fund, and NBFC stocks.