Learn the key strategies, rules, and risks to watch out for when trading Nifty 50 futures contracts on Indian exchanges.
Nifty 50 futures are one of the most actively traded derivative instruments in India. These contracts allow traders to speculate on or hedge against movements in the Nifty 50 index, which represents 50 of the largest and most liquid companies listed on the National Stock Exchange (NSE). While futures offer advantages such as leverage and liquidity, they also carry risks that demand careful planning and disciplined execution.
Whether you're a retail investor, a professional trader, or a portfolio manager, understanding the mechanics and nuances of Nifty futures is essential before diving in.
Nifty 50 futures are standardized derivative contracts to buy or sell the Nifty index at a specified price on a future date. Since indices cannot be physically delivered, these contracts are cash-settled on expiry, based on the closing price of the index.
Lot Size: 50 units of the Nifty index
Expiry: Last Thursday of every calendar month
Margin Requirement: Typically 10–15% of contract value, varying by volatility
Settlement: Cash-settled (no physical delivery)
Tick Size: ₹0.05 per unit = ₹2.5 per lot
Futures allow you to control a large contract value with a relatively small margin. While this enhances potential returns, it also magnifies losses. Use leverage judiciously and always define your risk limits.
Open Interest (OI) and trading volumes help gauge market participation and direction. Rising OI with price increase suggests accumulation, while falling OI with falling price may indicate long unwinding or exit.
Nifty futures respond sharply to macroeconomic news like GDP data, inflation reports, RBI policy decisions, and global events such as US Fed announcements. Maintain a calendar of key events and avoid trading during high-impact periods if uncertain.
Given the volatility of futures, always use stop-loss orders to cap potential losses. Lack of discipline in setting exits can wipe out capital quickly.
You must maintain sufficient margin in your trading account. Futures are settled daily through MTM—your profits or losses are realized every day. Failure to maintain required margins can lead to auto square-off by brokers.
Use futures to hedge against downside in your stock portfolio. For example, if you expect a short-term correction but don’t want to sell long-term holdings.
Popular among short-term traders who seek to profit from small price fluctuations. Requires sharp technical skills and disciplined exits.
This involves taking positions in two different contracts (e.g., near-month vs. far-month) to exploit the price differential.
Some traders exploit inefficiencies between Nifty futures and the cash index. These opportunities are typically short-lived and need high-speed execution.
Profits or losses from trading futures fall under business income as per Indian tax laws.
Taxpayers must maintain proper books of accounts.
Audit requirements apply if turnover exceeds specified limits.
Losses can be set off against business income and carried forward for 8 years.
It's recommended to consult a tax advisor for personalized guidance.
Back-test and paper trade your strategies before going live.
Track FII (Foreign Institutional Investors) data—they significantly influence Nifty movements.
Stay updated on regulatory changes from SEBI and NSE affecting margins, expiry rules, and contract specifications.
Use trading journals to record entries, exits, and learn from past trades.
Nifty 50 futures offer a dynamic platform to participate in India’s equity markets with flexibility and leverage. But with opportunity comes risk. A sound understanding of contract features, market indicators, and trading discipline is vital to success. Whether you're hedging your portfolio or speculating on market trends, staying informed, risk-aware, and focused will give you an edge in this high-stakes arena.
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 lot size is fixed at 50 units per contract. So, a movement of 1 point in the Nifty index results in a profit or loss of ₹50 per lot.
Nifty futures are cash-settled on expiry. Since the index is not a tangible asset, settlement is done based on the closing value of the index on the expiry day.
No, you don’t need a demat account. A trading account with F&O segment enabled is sufficient. Profits and losses are credited or debited directly from your linked bank account.
Yes, retail investors can trade Nifty futures. However, due to the use of leverage, it's crucial to understand the product well, as it can magnify both gains and losses.
Margins are set by the exchange and typically range between 10–15% of the total contract value. They are dynamic and may increase during volatile market conditions.