The recent inclusion of Jio Financial Services and Zomato in the Futures and Options (F&O) segment has sparked excitement in the market. This move has driven up the share prices of both companies, with investors speculating on their potential entry into India’s benchmark Nifty 50 index in upcoming reviews. The National Stock Exchange (NSE) is set to launch derivatives contracts on these stocks starting November 29, following revised guidelines from the Securities and Exchange Board of India (SEBI).
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Why F&O Entry Matters
A stock’s inclusion in the F&O segment generally signals strong market interest. In this case, F&O availability allows investors to trade these stocks using leverage and options, increasing their appeal and trading volume. According to Deepak Jasani of HDFC Securities, inclusion in the F&O segment often results in a price increase, as it allows investors to make leveraged bets on the stock.
Moreover, F&O eligibility is a key criterion for potential inclusion in the Nifty 50, the most widely tracked benchmark in the Indian stock market. Other requirements for entry include a minimum listing history and low trading costs over the past six months. Stocks that meet these conditions are reviewed by the NSE twice a year to determine their eligibility.
Recent Performance of Jio Financial and Zomato
The announcement of F&O contracts had an immediate impact on Jio Financial Services and Zomato shares. Jio Financial gained 6.8%, becoming the top gainer among Nifty 100 companies, with a market capitalization of Rs 2 lakh crore. Zomato followed closely, rising by 4.4% to reach a market cap of Rs 2.3 lakh crore. Investors are bullish on the prospect of both companies joining the Nifty 50 index in the March 2025 review.
Nifty 50 Inclusion: What It Means for Stocks
Being part of the Nifty 50 can bring significant benefits for a stock. It increases visibility, attracts institutional investment, and brings stability. Fund managers often include Nifty 50 stocks in their portfolios, which can drive demand further. Abhilash Pagaria from Nuvama Alternative and Quantitative Research predicts a “good run-up” for Jio Financial and Zomato if they join the index, likely at the expense of BPCL and Eicher Motors, which may be excluded to make room.
Inclusion in a major index also boosts trading volumes, making these stocks more liquid and accessible. Sriram Velayudhan of IIFL Institutional Equities believes that Zomato may even join the Sensex, India’s other major index, in December 2024, although this is less certain.
Broader F&O Segment Expansion
The NSE recently added F&O contracts on 45 stocks, which, aside from Jio Financial and Zomato, include companies like One97 Communications (Paytm), Poonawalla Fincorp, and Avenue Supermarts. Stocks often see a positive reaction to their addition in the F&O segment. On the day of the announcement, these stocks, along with others like CDSL and PB Fintech, recorded gains ranging from 2% to 6%. Avenue Supermarts, for instance, rose 1.7%, although experts do not expect it to join the Nifty 50 anytime soon.
What This Means for Investors
For investors, the F&O entry of stocks like Jio Financial and Zomato presents an opportunity for leveraged investments and options trading. It also increases the chances of these stocks being included in major indices, which can result in price appreciation. However, it’s essential to remember that trading in F&O carries risks, as it involves market volatility and the potential for quick losses if leveraged bets do not go as expected.
Opinion and Conclusion
The addition of Jio Financial and Zomato to the F&O segment is exciting, especially with the potential for Nifty 50 inclusion. These developments can drive higher demand and liquidity for these stocks, boosting their market performance. For investors, this represents both an opportunity for growth and a reminder of the risks that come with increased trading volume and leverage in the F&O market.
In conclusion, Jio Financial and Zomato’s F&O debut is a key event in the Indian stock market, signaling the growing prominence of these companies. Their potential inclusion in the Nifty 50 could provide investors with additional opportunities and reflect India’s dynamic, evolving market. However, a balanced approach is crucial, as F&O trading involves both opportunities and inherent risks.
