Stock market indices are a group of handpicked stocks, usually representing a particular theme or sector. They mirror the underlying stocks' performance, help you invest in a diversified portfolio and can give good returns.
FINNIFTY is one such index that represents financial stocks.
Launched in January 2021, the Nifty Financial Services Index (FINNIFTY) is an index that comprises 20 stocks of companies engaged in offering financial services.
The companies include banks, insurance companies, NBFCs, housing finance companies, etc. The returns depend on the performance of the overall financial sector. If the sector is bullish, the return would be attractive; if it is bearish, the returns would be low.
Some of the features of FINNIFTY are as follows:
FINNIFTY futures and options are also available for trading. Such derivatives are settled weekly or monthly, depending on the trader’s choice. The settlement is done in cash when the contract expires.
If the settlement is done every month, FINNIFTY contracts expire on the last Tuesday of the month in which the contract expires. For weekly contracts, however, the contract expires on the Tuesday of the week it is meant to expire. If, for some reason, Tuesday is a market holiday, the previous trading day will be considered the expiry day for FINNIFTY contracts.
You can choose to invest in the FINNIFTY index because of the benefits that you get. These benefits include the following –
Motilal Oswal allows you to buy FINNIFTY futures and contracts if you have opted for the F&O trading option in your account. If not, you can activate the F&O trading option and invest in FINNIFTY derivatives.
Besides derivatives, you cannot invest in FINNIFTY directly in the spot or cash market. You can either invest in a mutual fund in FINNIFTY or buy all 20 index shares in the same weightage.
The National Stock Exchange (NSE) has specified a specified quantity freeze limit for FINNIFTY. The limit is announced and reviewed monthly. If you trade in quantities higher than the specified freeze level, the NSE will reject the trade. So, check your trading volume. If it exceeds the freeze limit, reduce it so your trade can go through.
FINNIFTY is different from the Nifty 50 or the Nifty Bank Index. It combines banks, insurance companies, and other financial providers. It is highly diversified and can be a good addition to your portfolio if you want to invest in the financial sector. So, understand what FINNIFTY is all about and how to invest in it.