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Bank Nifty: One of the best trading instrument in Indian Market

By Rohit / a few 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).It provides investors and market intermediaries a benchmark that captures the capital market performance of Indian banking sector.

For a laymen trader, it is index for banking sector comprised of biggest 12 banks. Bank Nifty is not the 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. And that is due to the growing strength, influence of banking sector on overall market sentiments.

Banks included in BankNifty

Though there are total of 12 banks included in Bank Nifty share price, first 5 stocks 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

So, at least for now, the movement of SBI, HDFC Bank, ICICI Bank, Kotak & Axis Bank decides a lot about price & movement of BankNifty.

Contract Value & Lot size

Bank Nifty Contract value as on first week of August 2018 at price around 27500 is ₹ 11,00,000 (Eleven Lakhs). And margin required is nearly ~10 %, which is around ₹ 1,00,000 ( One lakh).

The lot size is 40.

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.

You can follow our telegram channel to get updates whenever latest study on Bank Nifty is published : https://t.me/traderpit

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