To bring down the level of replication in the CNX IT index, the NSE is reducing the number of constituent stocks in the index to 10 from 20. The changes will take effect from Friday.
The NSE said the weightage of the top stock in the index would be reduced to 25 per cent from 42 per cent, weighatge of the top two scrips combined to 50 per cent from 66 per cent, besides increasing the number of stocks available in the derivatives segment to 80 per cent from 50 per cent. This is being done to minimise the impact of a single stock in the movement of the index and truly reflect sectoral performance.
With this, Infosys, TCS, HCL Tech, Tech Mahindra, Wipro, Oracle Financial Services, MindTree, Info Edge India (Naukri), Cyient and Just Dial remain in the index.
The ones moved out are Hexaware, Firstsource, KPIT Tech, MphasiS, NIIT Tech, Persistent Systems, Polaris Consulting, Rolta, Tata Elxsi and eClerx.
To step up liquidity Siddarth Bhamre, Head — Technicals and Derivatives, Angel Broking, said, “The exchange is trying to improve liquidity in the CNX IT derivatives akin to the Bank Nifty. Liquidity is high in the Bank Nifty because the banking sector, by design, is affected by more number of factors than any other sector. Hence, volatility is high, which allows traders to take positions in its derivative contracts.
“Such frequency of volatility is not possible in the IT sector. So, it remains to be seen whether the CNX IT is able to generate that kind of liquidity.”
Lot size, trading cycle CNX IT derivatives would have a lot size of 25 and a tick size of five paise.
The trading cycle would consist of three months with three contracts existing at any given point in time (near month, next month and far month).
Contracts would expire on the last Thursday of every month and would be cash settled.
Options on CNX IT index would have 33 strike prices with 16 in the money, one at the money and the remaining 16 out of the money at an interval of 100.