An index is a group of selected stocks representing a specific industry or sector. An index represents the performance of the constituent stocks, and by tracking the movements of the Index, you can understand trends in a particular industry or sector, which helps you to grab potential opportunities.
Many indices exist, such as Nifty 50, Bank Nifty, Sensex, etc. But in this post, we are going to discuss “FINNIFY,” which is an index that represents the financial sector.
What is FINNIFTY?
FINNIFTY is a Financial Services Index introduced in January 2021 to track the performance of the Indian financial sector. It includes 20 stocks from the Nifty 500, which offer financial services.
The companies include Banks, housing finance, insurance companies, NBFCs, and other companies offering financial services. The performance of Finnifty is directly linked to the performance of the 20 stocks listed within it. When these individual stocks perform well, Finnifty will perform well and vice versa.
Features of FINNIFTY
- It is a benchmark of the Indian financial sector.
- Its base value is 1000 & Base date is 1st January 2021.
- Twenty companies from the Nifty 500 are part of FINNIFTY.
- It is rearranged every half year.
- Finnifty is calculated using the free-float market capitalization method.
- Derivates such as Futures & Options are available to trade in Finnifty.
- Benchmark to measure the performance of financial services and compare it with the overall sector’s growth.
List of Finnifty Components and Weightage
| Stock Name | Weightage |
|---|---|
| HDFC Bank Ltd | 36.83% |
| ICICI Bank Ltd | 20.19% |
| Axis Bank Ltd | 8.52% |
| Kotak Mahindra Bank Ltd | 7.70% |
| State Bank of India | 6.42% |
| Bajaj Finance Ltd | 5.72% |
| Bajaj Finserv Ltd | 2.45% |
| HDFC Life Insurance Company Ltd | 1.82% |
| SBI Life Insurance Company Ltd | 1.71% |
| Shriram Finance Ltd | 1.53% |
| Cholamandalam Investment and Finance Company Ltd | 1.27% |
| ICICI Lombard General Insurance Company Ltd | 1.01% |
| Power Finance Corporation Ltd | 0.91% |
| REC Ltd | 0.81% |
| SBI Cards and Payment Services Ltd | 0.78% |
| HDFC Asset Management Company Ltd | 0.73% |
| LIC Housing Finance Ltd | 0.70% |
| ICICI Prudential Life Insurance Company Ltd | 0.63% |
| Muthoot Finance Ltd | 0.44% |
| Indian Energy Exchange Ltd | 0.28% |
Note*
- Weightage can change based on the free float market capitalization method.
Sectors Involved In FINNIFTY
Finnifty Expiry Day
Futures & Options in Finnifty are settled on a weekly and monthly basis, & it is done in cash when the contract expires. Every week, it expires on Tuesday, and every month, the contract expires on the Last Tuesday. If, for any reason, Tuesday is a holiday, the previous trading day will be considered the expiration date for FINNIFTY contracts.
Finnifty Lot Size
Finnifty Futures & Options contract lot size is 40 quantities per lot, and you can trade a minimum of 1 lot and a maximum of 45 lots in one order.
Order type/Order book/Order attributes
- Regular lot order
- Stop loss order
- Immediate or cancel
- Spread order
Significance and Benefits of Investing in FINNIFTY
- Investors: Investors looking to invest in the financial sector can use the Finnifty index as a reference. It provides a clear picture of the sector’s performance and growth potential, allowing them to make informed decisions based on the Index’s movements.
- Industry Analysis: For analysts and researchers, Finnifty shows overall growth in the Indian Financial Sector. They can identify trends, market sentiments, and potential investment opportunities by analyzing the index trend.
- Diversification: One of the key benefits of investing in FINNIFTY is its diversified exposure to various stocks within the Financial sector. Unlike Bank Nifty, which primarily focuses on banking stocks, on the other hand, FINNIFTY includes Banks, housing finance, insurance companies, NBFCs, and other companies offering financial services. This diverse exposure gives investors more opportunities to participate in the growth and potential of the entire financial service sector rather than being limited to a specific segment, like only banking.
How To Trade In The FINNIFTY Index?
You can not trade Finnifty directly like any other stock, but instead, you can trade in its derivatives.
To trade Finnifty derivatives in your Demat account, search for “Finnifty Futures and Options” on the Trading Dashboard and select the desired strike price. Then, you can easily buy or sell these derivatives to take advantage of market opportunities.
Conclusion
Finnifty has gained popularity among traders. However, it is necessary to understand all factors to make a well-informed decision. I hope this post “What is finnifty?” and “How to invest in it?” helps you to understand finnifty more clearly.
Happy trading!
