What is the Bank Nifty? & How is it calculated?

What is Bank Nifty ?: Nifty Bank Index is comprised of the most liquid and large capitalised Indian Banking Stocks which trade on the National Stock Exchange (NSE). Performance of all these twelve stocks provides investors and market intermediaries with a benchmark that captures the capital market performance of the Indian banking sector.

Bank nifty Index was launched on September 15,2003. The Bank Nifty Index has 12 stocks from the banking sector. The Movement in these stocks. Bank Nifty Index moves according to movements of major banking stocks.

The Bank Nifty Index composition do not remain same always as the stocks which do not perform and leads to a fall in their market capitalization are replaced by other banks which performs and have their market cap more than these under-performers.

After Nifty Index, Bank Nifty is India’s second most followed economic indicator.

Bank Nifty Calculation Methodology

The Bank Nifty Index is computed using free-float adjusting market capitalization with base date of Jan 1, 2000 indexed to base value of 1000.

The Index level directly reflects the value of all the stock of that Index.

Performance and price movement of Bank Nifty is dependent on mostly Top 5-6 stocks.  Top Constituents by weighted List is given below in the table as on January 31,2019

Company’s Name Weight (%)
HDFC Bank Ltd. 35.23
ICICI Bank Ltd. 18.51
Kotak Mahindra Bank Ltd. 13.22
Axis Bank Ltd. 10.11
State Bank of India 8.68
IndusInd Bank 6.08
Yes Bank Ltd. 2.83
RBL Bank Ltd. 1.85
Federal Bank Ltd. 1.34
Bank of Baroda 0.84

[ Also Read : What is NSE India ]

How to trade Bank Nifty ?

You can trade in to Bank Nifty Index by trading in the Bank Nifty Futures and Options. Let’s more about Bank Nifty Future and Option.

☘️ Performance of Nifty Bank Since 2005 ☘️

Bank Nifty

What is Bank Nifty Future ?

Bank Nifty Future is a derivative contract traded on the National Stock Exchange of India (NSE) Whose underlying is Bank Nifty Index. Means that Bank Nifty Futures will derive its value from Bank Nifty Index which depends on the movement of top banking stocks in the Index. The Future Contract on Bank Nifty Index was launched on 13 June, 2005.

From the starting date to expiry date, Future contracts can be traded. The specification of Bank Nifty Futures Contract is:

Instrument Type FUTIDX
Underlying Index Bank Nifty
Lot Size 20 Units
Expiry Date last Thursday of the expiry Month.
Trading Hours Monday to Friday – 9:15 am to 3:30 pm
Trading Cycle 3 – Month trading Cycle – the near month, the next month, and the far month.
Daily settlement Price Last half hour’s weighted average price
Final Settlement Price Final settlement price for a Bank Nifty Futures contract shall be the closing Market segment of NSE on the last Thursday of the contract month
Final Settlement Procedure Final Settlement will be cash settled in INR based on final Settlement price
Settlement All the Future contracts are cash settled in INR.

[Also Read : What is Nifty]

Nifty Bank Options

The option contract is the right, but not the obligation, to buy or sell a particular futures contract at a specific price (Strike Price) on or before certain expiration date.

Option is the contract between two parties wherein the buyer receives a privilege for which he pays a premium and the seller accepts an obligation for which he receives a fee.

Traders can trade Through the Bank Nifty Option contract and it is European style and cash settlements are based on the Bank Nifty Index.

The Bank Nifty Contract Specifications are:

  • Instrument Type: OPTIDX (i.e. Option on Index)
  • Underlaying instrument Index is Bank Nifty.
  • Option Type: CE/PE (Call or Put option)
  • Expiry date: Date of contract expiry
  • Strike Price: Strike price for the contract
  • Strike price Intervals: The number of contracts provided in options on Index is based on the range in previous day’s closing value of the underlying index and applicable as per the below table:
Index Level Strike Interval No of Strikes
≤ 2000 50 8-1-8
>2000 up to ≤ 3000 100 6-1-6
>3000 up to ≤ 4000 100 8-1-8
>4000 up to ≤ 6000 100 12-1-12
>6000 100 16 –1-16

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