Which is the best index for options trading Nifty or Bank Nifty?
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Why is the Nifty considered a better index for Options Trading?
I shall always tell beginners to prefer options trading with Nifty Index rather than Bank Nifty, since it is less volatile. Over time, you are advised to trade in bank nifty to make higher benefits.
Bank Nifty Index is more volatile than Nifty and also you can earn more in Bank Nifty. But If you are a beginner in options trading, Nifty is the best option to make consistent profits.
After getting confidence on handling trades in Nifty you can shift to Bank Nifty to make high profits.
Difference Between Nifty and Bank Nifty
Generally, it is said that the Bank Nifty is easier to follow than the Nifty Index. Bank Nifty involves risk higher than Nifty.
You can trade in options and lot size is the basic measure of shares in quantities. For Nifty options trading 1 lot – 50 quantities, and Bank Nifty options trading 1 lot – 25 quantities.
When you compare other parameters like volatility, the bank nifty can move quicker than nifty, if nifty moves 1 percent then bank nifty will rise by 1.5 percent.
Bank Nifty A Sectoral Index:
Bank Nifty is a sectoral index focusing on bank stocks alone. They include private and public stocks and you can find those traded in Futures & Options (F&O) segments in the National Stock Exchange.
The bank index stocks are measured using free float methodology, and they are weighed based on free float market capitalisation.
The indexes are rebalanced semi annually and the valuations are obtained on the real time basis in the trading hours.
Bank Nifty Weightage Stocks List: July 2023
HDFC Bank Ltd. (HDFCBANK) – 28.42%
ICICI Bank Ltd. (ICICIBANK) – 24.04%
State Bank of India Ltd. (SBIN) – 9.89%
Kotak Mahindra Bank Ltd. (KOTAK BANK) – 9.40%
Axis Bank Ltd. (AXISBANK) – 9.35%
Nifty 50 Top Companies:
Nifty comprises 50 top companies listed under the National Stock Exchange based on free float market capital, further their trading values is an indicator of the economies.
You will observe that the Nifty is a combination of multiple stocks from different sectors which bear different weightage.
When news affecting the national/international economy gets aired then these Nifty stocks go highly volatile.
Nifty 50 is utilised for different purposes, you can find those benchmarking structured products, ETFs, fund portfolios, and launching of index funds.
Top 5 constituents by weightage: