Do Not Call
Explore how Nifty 50 futures function, their role in the derivatives market, and the common approaches observed among market participants.
The Nifty 50 is one of India’s most widely tracked stock market indices, representing the 50 largest and most liquid companies on the National Stock Exchange (NSE). It serves as a benchmark for measuring the health of the Indian equity market and plays a vital role in both domestic and global investing.
Nifty 50 futures allow traders and investors to speculate on or hedge against market movements without owning the underlying stocks. These contracts are part of the derivatives market and function as standardised agreements to buy or sell the Nifty 50 index at a predetermined price and future date. Understanding how these futures work helps in managing risk and evaluating trading approaches more clearly.
Nifty 50 futures are derivative contracts that track the performance of the Nifty 50 index on the NSE. When you buy a Nifty 50 future, you agree to purchase the index at a fixed price on a future date, expecting its value to rise. When you sell, you are anticipating the index will fall. These contracts are cash-settled, meaning there is no delivery of the 50 underlying stocks; instead, gains or losses are settled in cash upon expiry.
Common uses of Nifty 50 futures include:
Speculation – To profit from expected movements in the index.
Hedging – To protect a portfolio against index-level volatility.
Liquidity access – To enter and exit large index-based positions efficiently.
Several strategies are commonly used in Nifty 50 futures trading, including those that beginners may explore for learning purposes.
A long position profits when the index rises, while a short position profits when it falls.
Example: Buying Nifty 50 futures when technical indicators signal an upward trend
Enter trades when the price breaks resistance (breakout) or temporarily returns to support before continuing (pullback).
Example: Buying futures after a breakout above a key resistance level.
Offset potential portfolio losses by taking an opposite position in Nifty 50 futures.
Example: Selling futures to protect gains in a portfolio during expected market volatility.
Take both long and short positions in contracts with different expiry dates.
Example: Buying a near-month contract and selling a far-month contract to profit from price differences.
Trade based on the gap between the futures price and the spot price.
Example: Selling futures and buying spot ETFs when futures trade at a premium.
Apply rules like using stop-loss orders, avoiding over-leverage, and sizing positions carefully.
Example: Limiting losses by placing a stop-loss order 2% below the entry price.
Here are the standard contract parameters for Nifty 50 futures as defined by NSE:
| Specification | Details |
|---|---|
Underlying |
Nifty 50 index |
Instrument Type |
FUTIDX (Index Futures) |
Lot size |
75 units |
Tick size |
₹0.05 per index point movement |
Contract cycle |
Near, next, and far month |
Expiry |
Last Thursday of the month |
Settlement |
Cash settled |
Trading hours |
9:15 AM to 3:30 PM |
Margin requirement |
Approx. 10–15% of contract value |
Futures Price = Spot Price × [1 + (Risk-Free Rate – Dividend Yield) × (Time to Expiry / 365)]
Where:
Spot Price: Current level of the Nifty 50 index
Risk-Free Rate: Typically, the yield on government securities
Time to Expiry: Number of days until the futures contract expires
Dividend Yield: Expected annual dividend yield of the Nifty 50 constituents
The formula reflects the cost of holding the position, factoring in interest rates and expected dividends. Futures may trade at a premium or discount to the spot index depending on these and market sentiment.
Understanding the process and eligibility requirements is essential before trading Nifty 50 futures. Below are the general steps involved.
You need to open an account with a SEBI-registered broker that offers access to the NSE derivatives segment. Nifty futures are cash-settled, but having a demat account is still mandatory.
Margins are the portion of funds blocked by your broker to initiate a futures trade. These include:
Initial Margin – Required to enter a trade.
Maintenance Margin – Required to keep the position open.
Select from three available contract cycles: near, next, and far month. Beginners often prefer near-month contracts due to their higher liquidity.
Place orders through your trading platform. You can choose between:
Market Order – Executes at the current market price.
Limit Order – Executes only at the specified price.
You can either:
Square off your position before expiry.
Hold the contract until expiry and have it cash-settled at the final settlement price.
Real-time tracking of Nifty 50 futures helps traders make timely decisions, manage risks, and respond quickly to market movements.
You can track Nifty 50 live futures prices on the NSE India website, broker platforms, or financial portals. These prices reflect expectations of the index’s future value and are influenced by:
Interest rate movements
Time left until expiry
Expected dividends
Understanding the risks of Nifty 50 futures is essential before trading, as leverage and volatility can magnify both gains and losses.
Leverage Risk
Leverage amplifies both profits and losses. Even a small market movement can significantly impact your position.
Market Volatility
The index can experience sharp swings due to economic data releases, global events, or policy changes.
Margin Calls
If the market moves against your trade, your broker may issue a margin call, requiring you to deposit additional funds.
Liquidity Risk
Contracts with low trading volumes can reduce ease of entry and exit, affecting execution quality.
Knowing how Nifty 50 futures are taxed is important for traders, as it directly affects net returns and compliance requirements.
Profits from trading Nifty futures are treated as business income under the Income Tax Act. Consult a tax professional for personalised advice and keep the following in mind:
Tax application – Profits are taxed as per your income slab rate.
Tax audit – May be required if turnover exceeds prescribed thresholds.
Advance tax – Could apply depending on projected income levels.
Trading in Nifty 50 futures is regulated under SEBI’s Derivatives Framework. Key regulatory features include:
Daily mark-to-market (MTM) settlement of open positions
SEBI-mandated margins and open interest limits
NSE as the centralised trading platform
Real-time surveillance systems in place to manage volatility
Real-time surveillance for risk management
These measures are designed to uphold market integrity and safeguard your interests.
Nifty 50 futures provide a structured and efficient means of participating in the Indian equity markets beyond conventional stock investing. Whether used for speculation, hedging, or strategy-driven trading, futures offer both flexibility and market access.
However, they carry inherent risks due to leverage and market volatility. For beginners, a strong understanding of market structure and disciplined trading practices is essential.
This content is for informational purposes only and the same should not be construed as investment advice. Bajaj Finserv Direct Limited shall not be liable or responsible for any investment decision that you may take based on this content.
The current lot size for Nifty 50 futures is 75 units per contract.
Nifty 50 futures are cash settled on the last Thursday of the expiry month.
Yes, you do not need to own the underlying stocks, as Nifty 50 futures are index-based and cash-settled.
Nifty futures trading involves complexity, leverage, and exposure to market volatility. Beginners typically review how these factors work and the associated risks before participating.
You can find live data on the NSE website and most broker platforms.
The margin requirement for 1 lot of Nifty 50 futures is usually 10–15% of the contract value, depending on market conditions and broker policies.
To buy Nifty 50 futures and options, you need a trading and demat account with a SEBI-registered broker that provides access to the derivatives segment of the NSE.
You can hold a Nifty futures contract until its expiry date, which is the last Thursday of the contract month, unless you choose to square off earlier.
Nifty futures contracts are agreements to buy or sell the Nifty 50 index at a set price on a future date. They are cash-settled, meaning no delivery of individual stocks takes place.
The Nifty 50 index, which represents the 50 largest and most liquid companies on the NSE, is the underlying index for Nifty futures.
The margin requirement is typically between 10–15% of the contract value, and it includes both initial margin and maintenance margin.
The lot size for Nifty futures contracts is currently 75 units, as mandated by the NSE.
