Bank Nifty: Index for Indian Banking Sector

8 months ago

Bank Nifty

As per NSE, Bank Nifty (BNF-NSE) represents the 12 most liquid and large capitalised stocks from the banking sector which trade on the National Stock Exchange (NSE).

Bank Nifty is index for banking sector comprised of biggest 12 banks. It provides investors and market intermediaries a benchmark that captures the capital market performance of Indian banking sector.

Bank Nifty isn’t the only sector specific index, we have NIFTY IT ( IT sector ), NIFTY Auto ( Auto Sector) and so on. You can find the list of all the index listed on NSE here.

The reason that Bank Nifty is most popular sectoral index is because this is most traded & liquid index future, right after NIFTY. Banking sector in itself is one of the biggest and growing sector in Indian economic conditions currently.

Banks included in BankNifty

Bank Nifty constituents are below mentioned 12 banks, though it is the first 5 banks which carry the maximum weight in overall calculation and thus movement of the index.

  1. State Bank of India          24.89
  2. HDFC Bank                       21.64
  3. ICICI Bank                        16.44
  4. Kotak Mahindra Bank     7.27
  5. Axis Bank                           7.21
  6. Bank of Baroda                 4.93
  7. Punjab National Bank     4.50
  8. Bank of India                     3.42
  9. Canara Bank                      3.16
  10. IndusInd Bank                  2.54
  11. Yes Bank                             2.01
  12. Union Bank                        1.97

As you can see, SBI, HDFC Bank and ICICI Bank together hold more than 50% weightage in Bank Nifty Index valuations.

Thus, the price movements of these three banks decides a lot about movement of BankNifty.

Contract Value & Lot size

Bank Nifty Contract value as on first week of January 2019 at price around 27500 is ₹ 7,40,000 (Seven Lakh Forty thousand). The contract value is calculated by multiplying the current future lot size : 20 with the current price of the index :~27500.

And margin required is nearly ~10 %, which is around ₹ 54,000 ( Fifty four thousand). You can check the margin requirement by asking your broker or online margin calculator provided by Zerodha and Upstox.

Bank Nifty Weekly and Monthly Derivatives

Bank Nifty is traded both in futures and options. In futures there are only monthly expiry options.

But, in options, there are options in both weekly and monthly expiry.

Bank Nifty was one of the first index in which weekly options were introduced to trading purposes. Now, they are introduced in Nifty too.

These weekly bank nifty options expire each Thursday.

They are traded along side monthly options. And you get options to trade in all 4 weekly expiry dates.

Options Chain

There are couple of profitable options trading strategy for trading Bank Nifty weekly options. This is being used by many proprietary trading desks.

This you can see from increasing trading volumes in these options.

Bank Nifty options chain can be accessed on NSE India site by clicking here.

Where to get Bank nifty candlestick charts?

If you are looking for daily or end of the day (EOD) charts of bank nifty, you can find them on both Google Finance as well as Investing.com website.

If you have an account with any of the discount brokerages, then you can get access to daily as well as intraday charts provided by them to their clients.

As you will read in below, BankNifty is a volatile but trendy derivative to trade. I have seen plenty of traders who trade banknifty only.

If you are planning to trade in BNF, then you should look into the historical charts to see if your trading strategy is profitable.

Note: Though it is easy to find Daily, EOD & intraday charts and data from sources mentioned above, to access historical data like historical options chain, you need to buy data from a vendor.

BankNifty options you can’t trade in Zerodha

There have been news as well issue confirmed by Zerodha in their forum, where they have confirmed that they can’t allow traders to write certain options.

The details can be found by following this link. In short it has to with 15% trading limit put forward by NSE.

This is not the case with others brokers like Upstox and Fyers.

Factors affecting BNF movements

Though most time it seems that BNF and NF move in tandem with each other, they don’t move for exactly same reasons. Sometimes, Nifty price movements lead the BankNifty movements and other times, it is opposite.

But the factors, which mainly effect BankNifty are:

  • RBI policy announcements. ( Read: What is RBI Policy & why is it important)
  • Government Bonds prices.
  • Money Market movements.

Just like trading in NIFTY, these factors are not absolute for deciding about general direction of Bank Nifty prices.

As with NIFTY, when sentiments are bullish, it will go up, whatever the above factors say. Vice versa in bearish sentiments.

Is trading BNF risky?

Due to its price, even 0.5% of movement in prices leads to around 150 points of movement currently. This gives a general idea that BNF is highly volatile and thus risky to trade.

This is not true. Trading BNF is not risky at all.

Bank Nifty is as risky to trade as any other leveraged instrument ( like NIFTY, Stock Futures) is. You need to follow the same rules of trading to trade BNF. With proper position size and stop loss management, you can create a profitable way to earn money from trading Bank Nifty.

As you can see from regular charts shared on our site, you can see that BankNifty follows the trend and gives good moves. If you are into trading Index futures, then Bank Nifty is something you should definitely consider.

 


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