Reasons of trading nifty futures

Posted by Moneyclassicresearch on June 3rd, 2017

Nifty futures has a very special place in the Indian derivative markets. It’s the most frequently traded futures tool, and in the Indian derivative markets; it has become the most liquid contract. For Indian equity market, NIFTY 50 index is the benchmark stock market index of National Stock Exchange of India, Nifty is a wholly owned subsidiary of the National Stock Exchange Strategic Investment Corporation Limited. There are agencies that provide their intra-day calling services to inform the traders about the current fluctuations of the market and help with stock buying and selling activities in Nifty, after a subscription. There are many reasons for this, here are some –

It is diversified Nifty futures has a diversified portfolio of 50 stocks. As it is a portfolio of stocks, the movement of the Index does not really depend on a single stock. When you trade Nifty futures you completely eliminate ‘unsystematic risk’ and deal with only with ‘systematic risk’.

1. Hard to manipulate – The movement in Nifty is a response to the collective movement in the top 50 companies in India. Hence there is virtually no scope to manipulate the Nifty index. However the same cannot be said about individual stocks.
2. Highly Liquid – We discussed liquidity earlier in the chapter. Since the Nifty is so highly liquid you can literally transact any quantity of Nifty without worrying about losing money on the impact cost. Besides, there is so much liquidity that you can literally transact any number of contracts that you wish.
3. Lesser margins – Nifty futures require much lesser margins as compared to individual stock futures. To give you a perspective Nifty’s margin requirement varies between 12-15%, however individual stock margins can go as high as 45-60%.
4. Broader economic call – Trading the Nifty futures requires one to take a broad-based economic call rather than company specify directional calls. From my experience, doing the former is much easier than the latter.
5. Application of Technical Analysis – Technical Analysis works best on liquid instruments. Liquid stocks are hard to manipulate, hence they usually move based on the demand-supply dynamics of the market, which obviously is what a technical analysis mainly relies on.
6. Less volatile – Nifty futures are less volatile compared to individual stock futures. To give you perspective the Nifty futures has an annualized volatility of around 16-17%, whereas individual stocks have annualized volatility of upwards of 30%.

Nifty futures trading can be a good option for earning a good return. Traders can take help from experts to get success in it. If you are looking for one of the best advisory company then Money Classic Investment Advisers is the leading company providing tips on nifty futures. We offer recommendations on nifty futures based on various tools and market trend. You can also trade in nifty futures and make money by taking help from tips on nifty futures provided by us.