SEBI NEW F&O Rule " Pre Market Report Nifty & Bank Nifty 03 October 2024, Range, Prediction

Summary

The video discusses recent changes introduced by SEBI on October 1, 2024, aimed at reducing speculation in F&O trading. Key updates include contract size increases, limits on weekly expiries, and margin rule adjustments. Some changes take effect in November 2024, while others will roll out in 2025. The presenter explains how these changes may impact traders, particularly impulsive ones, and speculates on potential shifts in trading patterns. The video also covers pre-market analysis for Nifty and Bank Nifty, market trends, and the influence of international events on the Indian market.

Takeaways

• 📢 SEBI introduced six new changes for F&O trading to reduce speculation, with some changes effective from November 2024, and others in 2025.
• 📅 Three rules will be implemented on November 20, 2024, two more in February 2025, and the final rule in April 2025.
• 💼 SEBI's major changes include stopping calendar spread margin benefits and brokers monitoring trade members four times a day starting April 2025.
• 💰 SEBI is increasing the contract size for options, with Nifty's lot size expected to rise from 25 to 75, effective November 20, 2024.
• 📉 Only one benchmark index weekly expiry per exchange will be allowed, with NSE likely to choose Bank Nifty, and BSE potentially opting for Sensex.
• 🔍 SEBI also plans to increase expiry day margin by 20%, which could impact traders, especially impulsive ones.
• 📝 Traders will still be able to trade existing November and December options, but no new ones can be opened after November 20, 2024.
• 📊 U.S. market conditions are affected by the Iran-Israel conflict, with major indices like Dow Jones, S&P 500, and NASDAQ all showing significant drops.
• 🌍 Global events, such as rising oil prices and U.S. private payroll data, are causing market uncertainty and influencing Indian market trends.
• 🚗 Auto sector stocks like Hero MotoCorp and Maruti Suzuki are gaining attention due to positive sales figures, while FMCG might be impacted by heavy rains.

Q & A

What are the key objectives behind SEBI's new changes in F&O trading rules?

SEBI introduced new changes to reduce speculation in F&O trading. These changes include increasing contract sizes, limiting weekly expiries, and introducing stricter monitoring of traders exceeding their limits.

When will SEBI's six changes in F&O trading rules be implemented?

Three changes will be effective from November 20, 2024, two from February 2025, and one from April 2025.

How will the new SEBI rules regarding upfront premium collection affect traders?

The new rules will likely not affect the majority of traders but will impact impulsive traders. Upfront premium collection from buyers will be required, which could affect those who trade frequently without proper margin control.

What are the key changes in the F&O contract sizes effective from November 20, 2024?

The option lot sizes will be increased from the current range of ₹5-10 lakh to ₹15-20 lakh. Bank Nifty’s lot size may increase from 25 to 30, and Nifty's lot size may increase from 25 to 75.

How will SEBI's changes to calendar spread margin benefits impact traders?

SEBI will remove the calendar spread margin benefit, which is currently offered because of the low risk involved in calendar spreads. This will affect traders who rely on this benefit to reduce their margin requirements.

What will happen with weekly expiries under the new SEBI rules?

SEBI will allow only one benchmark index weekly expiry per exchange. The presenter believes that NSE may opt for Bank Nifty as the weekly expiry and BSE may opt for Sensex to maintain competitive volume.

What are the present concerns with Nifty and Bank Nifty options under SEBI’s new rules?

The presenter believes that Nifty, which consists of 50 stocks, and Bank Nifty, which consists of 12 stocks, may lead to speculation due to their limited stock base. This could increase market volatility.

How will the new SEBI rules affect traders who have open options positions before November 20, 2024?

Traders will be able to continue trading existing options positions or those opened before November 20, 2024, but no new options can be opened under the old contract sizes after this date.

What is the expected impact of the Middle East conflict on the stock market?

The escalation between Iran and Israel has caused significant negative sentiment in the U.S. markets, leading to declines in major indices and an increase in oil prices. This is expected to impact Indian markets as well.

What technical levels are critical for Nifty and Bank Nifty according to the video?

For Nifty, the critical support is at 25,650, and resistance is at 26,000. For Bank Nifty, the support is at 52,600, and resistance is at 53,250. The presenter expects weak sentiment to persist if these levels are not breached.

Outlines

00:00

📊 SEBI's New F&O Rules and Market Impact on October 1st, 2024

The video begins by discussing six new rules introduced by SEBI regarding F&O trading, which aim to reduce speculation. Three rules will take effect on November 20, 2024, two in February 2025, and one in April 2025. Key changes include adjustments to contract sizes, removal of calendar spread margin benefits, and increased trade monitoring. The speaker believes these changes will not significantly impact most traders but may affect impulsive ones. The November changes in contract sizes, particularly for Nifty and Bank Nifty, are highlighted, along with concerns about SEBI's decision to allow only one benchmark index weekly expiry per exchange.

05:00

📉 U.S. Market Decline and Its Impact on Indian Stock Market

The U.S. market experienced a sharp decline on Tuesday, driven by escalating tensions between Iran and Israel. The Dow Jones fell by 4%, S&P by 93%, and NASDAQ by 1.53%. Additionally, the VIX spiked by 15%, reflecting heightened market nervousness. Private payroll data released showed job growth, but the market remained flat due to geopolitical concerns. The Indian market reacted negatively, with Gift Nifty closing significantly lower. FMCG and auto sectors are highlighted as areas of focus, especially with expected rain and sales figures from companies like Hero MotoCorp and Maruti Suzuki. Institutional activity showed heavy selling by FIIs.

10:01

📈 Technical Analysis of Nifty and Bank Nifty Amid Sell-off

The video wraps up by analyzing the technical performance of Nifty and Bank Nifty. After a sell-off on Monday, Nifty displayed range-bound movement on Tuesday, forming a 'doji' pattern and showing a continuation of negative momentum indicators. The speaker expects weak market sentiment with 25,650 acting as support and potential upward movement if Nifty breaks 26,000. Bank Nifty also faced pressure, closing below 53,000 and showing a bullish candle pattern. The resistance and support levels for both indices are further detailed based on weekly options data, with expectations of resistance at 26,000 and support at 25,600.

Keywords

💡SEBI

SEBI (Securities and Exchange Board of India) is India's regulatory body for securities and commodity markets. In the video, SEBI's recent changes to futures and options (F&O) trading rules are discussed, including measures aimed at reducing speculation. These changes directly impact traders by introducing new regulations on contract sizes, margin benefits, and trading limits.

💡F&O trading

F&O (Futures and Options) trading refers to the trading of financial contracts that derive their value from an underlying asset. The video focuses on new SEBI regulations concerning F&O trading, such as increasing contract sizes and modifying margin rules, which aim to reduce speculation in the market and impact traders' strategies.

💡Contract size

Contract size refers to the amount of an asset or security that is traded in a single contract in F&O trading. SEBI has increased the contract sizes, with Nifty's lot size expected to rise from 25 to 75, making it more costly to trade options. This change is part of SEBI's effort to align contract sizes with current market conditions, as seen in the video.

💡Benchmark index

A benchmark index is a standard against which the performance of securities, mutual funds, or investment portfolios is measured. The video discusses SEBI's new rule allowing only one benchmark index weekly expiry per exchange, which could shift trading volumes between major exchanges, particularly for the Nifty and Bank Nifty indices.

💡Margin benefit

Margin benefit refers to the reduced amount of money that a trader needs to keep as collateral to enter into certain types of trades. SEBI's new rule will remove calendar spread margin benefits, making trading more expensive for traders who use these strategies. The removal of this benefit is expected to affect those who engage in low-risk calendar spread trades.

💡Impulsive traders

Impulsive traders are those who make quick, often emotionally driven trades without careful analysis. In the video, it is mentioned that SEBI's new regulations, like increasing contract sizes and monitoring trade limits, are aimed at controlling such traders, who may be more affected by these changes than more methodical traders.

💡Weekly expiry

Weekly expiry refers to the closing or settlement of option contracts on a weekly basis. SEBI's rule to limit weekly expiry options to one benchmark index per exchange aims to reduce excessive trading volume and speculation. The video explains how NSE might opt for Bank Nifty as its benchmark, while BSE may choose Sensex, potentially redistributing trading volumes.

💡Nifty and Bank Nifty

Nifty and Bank Nifty are two key indices of the Indian stock market. Nifty tracks the performance of 50 major companies, while Bank Nifty tracks 12 banking sector companies. In the video, changes to the lot sizes of these indices are discussed, along with SEBI's new rules on limiting weekly expiries, which could affect trading volumes and strategies in these indices.

💡Option writing

Option writing, or selling, involves creating and selling options contracts. The video mentions new call and put option writing levels for Nifty, indicating where market participants are expecting resistance or support. SEBI's rules, like increasing contract sizes, could make option writing more expensive and change traders' risk strategies.

💡Premium collection

Premium collection refers to the process of collecting premiums from buyers in options trading. SEBI's new rules require upfront premium collection from buyers, which is expected to curb speculation by making it more difficult for traders to open new positions without sufficient funds. The video explains how this rule will take effect in early 2025.

Highlights

SEBI released six new changes related to F&O trading to reduce speculation on October 1st.

Three of the six changes will be effective from November 20th, 2024, two from February 2025, and one from April 2025.

From April 2025, brokerages are required to monitor every trade member four times a day to ensure they are not exceeding their trade limits.

From November 20th, the contract size of options will increase, with Nifty's lot size expected to increase to 75 from the current 25, and Bank Nifty's lot size increasing to 30 from 25.

SEBI will allow only one benchmark index weekly expiry per exchange, which is expected to temporarily reduce option volumes.

The expectation is that NSE will opt for Bank Nifty as its weekly benchmark due to its higher trading volume, while BSE might choose Sensex.

Removal of calendar spread margin benefits will be implemented in February 2025, affecting traders who use this strategy.

The upfront premium collection from buyers will be implemented in February 2025, but it is not expected to impact the majority of traders.

Effective from November 20th, the maximum option contract value will be raised to 15-20 lakh rupees from the current 5-10 lakh rupees.

Changes in contract size and benchmark expiry rules are expected to cause a temporary reduction in trading volume, but it is likely to increase again over time.

The current market reaction is expected to be negative due to recent escalations in the Middle East conflict and SEBI's new F&O rules.

Recent global events, such as the Iran-Israel conflict, have caused significant drops in major U.S. indices like the Dow Jones, S&P 500, and NASDAQ.

Increased volatility in the global markets is reflected by a 15% spike in the VIX index.

U.S. markets saw neutral outcomes after the release of the September payroll data, which showed 143,000 jobs added against an expectation of 124,000.

FMCG stocks will be in focus due to expectations of above-average rainfall in October, impacting companies like Dabur, which anticipates mid-single-digit revenue contraction.

Auto sector stocks are expected to be active, with Hero MotoCorp reporting a 21% YoY sales increase and Maruti Suzuki showing a 2% rise.

Transcripts

hello everyone not on the se's board

meeting day but on the next day I mean

on October 1st sebi released the six

changes related to f&o trading to reduce

the speculation so in this video Let's

see those first and then we'll discuss

about our regular premarket report for

today 3rd October 2024 for the near

shock market in terms of nifty and Bank

Nifty first of all if anyone fancy

reading the sebi circular please have a

go I will attach the link in the

description as well as in the pin

comment now regarding the changes there

are six if required please pause and

have a look out of six three will be

effective from November 20 then two will

be effective from February 2025 and one

rule will be effective from April 2025

here the new rules that are going to

implement from February and April 2025

won't affect majority of the people

since those are just upfront premium

collection from buyers and then removal

of calendar spread margin benefit I mean

at present for the calendar spread

because the risk is very low the

brokerages are offering better margin

that margin benefit SEI asking the

Brokers to stop it then from April 2025

onwards sebi requested The Brokerage to

monitor every trade member four times in

a day to see whether they are exceeding

their trade limit or not kind of and if

they found anyone exceeding the limit

then and there itself Brokers has to

limit the members trading I personally

think all those won't affect most of the

Traders but do affect the impulsive

Traders now coming to November 20th

implementation items the bigger one is

changes in the contract size as per the

present rule the option lot size should

be between 5 lakh Rupees to 10 lakh

Rupees this rule was set back in 2015

when Nifty was trading between 6,000

points to 8,000 points so now sebi said

they're increasing the lot size to 15

lakh to 20 lakh rupees hence as per the

new rule maybe Bank Nifty loot size

might increase up to 30 from the present

25 level not a much of the big change

but for Nifty it expects to increase

around 75 from the present level 25 so

that's the first implementation change

that will be effective from 20th

November then the next important one

they said they will allow only one

Benchmark index weekly expiry per

exchange this rule is the SE Hall of

Fame rule they genuinely think that this

will curve and reduce the option volume

but honestly I think this might

temporarily curb in the volume but it

will again increase in no time let me

explain why at present 90% of the option

trade volume is happening in the NSE and

the remaining 10% is on BSE in that NSE

Bank Nifty trade volume will be roughly

around 45% and nifty's trade volume will

be 35% just for info both nsse and BC

are not government owned BC is is the

one listed company whereas NSC Stock

Exchange is privately owned hence both

of them will look for becoming

profitable so my guess is nsse Will opt

for Bank Nifty as their weekly Benchmark

expiry over Nifty since its option lot

size doesn't change much and also it got

the high trading volume on the other

hand I expect BC will opt for SX over

the bankx as a strategic move in this

way those who traded in Nifty will move

to sensex and I mean Nifty is made up of

50 number of stocks even that we were

suspecting big players were manipulating

that now SX is only 30 number of stocks

and in Bank Nifty case it's even worse

only made up of 12 number of stocks and

it's based on one sector think about the

amount of speculation it can cause like

NPA problem it had back in 2019 to 2020

period and also at present most people

familiar with Nifty price action now if

you want to get familiar with s SE means

I suspect we need at least one year to

understand its price M anyway I know

always people criticize me whenever I

talk about sebi but it is what it is

honestly I think this will make the

traders to lose more but if I'm wrong

happy to be then the final one they

increased the exper day margin by 20% so

these are the three changes that will be

effective from November 20th now the

question coming to everyone's mind what

happens to my existing November or

December options open interest can I

trade it after as far as I know the

existing options or the options opened

or going to open before nober 20 we can

able to trade it can be bought or sold

however we just can't open the new one

from November 20 and so far now neither

nsse nor BC gave their comment regarding

which Benchmark they're going to choose

for weekly options trading we can expect

the answer either this week or next week

so those are all my takes regarding the

se's new fno rules now let's look at our

regular pre-market staff about us Market

because there was an escalation between

Iran and Israel on Tuesday US market

closed substantially negative Dow Jones

was down 4% S&P down 93% and NASDAQ

decreased 1.53% on top of that vix

increased 15% and crossed 19 then last

night before the market opening ADP

private payroll data released the

September month new jobs data after four

straight months of below expectation

value last month data exceeds the

expectation I mean 1ak 143,000 jobs

added against expectation of 1ak 124,000

this number I won't say it's positive

but more of a neutral number and present

Market is very nervous about conflict

escalation in the Middle East so last

night US market closed flat all major

IND index Dow Jones S&P 500 and Nasdaq

all closed less than. 1% change compared

to Tuesday night closing basically

Tuesday drop still has to reflect on the

Indian market in line with that

yesterday morning gift Nifty dropped

significantly and closed at 25,800

equating that with the spot Market it's

indicating the gap down of over 100

points then regarding IND ADR as it is

everything closed mild negative and

little bit more negative on Tuesday

night so if you calculate the Arbitrage

means ICC Bank infosis HDFC bank and

Reliance gdr all indicating the negative

Arbitrage of around 1.5 to 2% only Vio

got not much of the difference hence

overall both sector indicating a

negative trade moving on this Middle

East conflict also increased the oil

price by near 2% at the time of this

video Doud crude closed at71 us per

barrel and Bren crude closed at75 us per

bar Barrel so those were the things

happened on the dollar market now coming

to new Indian stock related first fmcg

will be on Focus since meteorological

Department released the Press statement

that they expect above average rain in

October and in addition Dober mentioned

in their quarterly update because of

heavy rain they're expecting their

revenue to contract mid single digit

which is not good then second some auto

companies released the sales figure hero

motop sales increased 20 1% year-over

year marua Suzuki increased near 2% so

we can expect Auto sector also will be

on Focus finally about institution last

Tuesday also FIA was Mega sellers after

Monday the net sold for 5,600 rupes and

as usual da supported the market by net

buying for 4,600 CR rupes then in

derivative Market the net sold almost

everywhere it looks like they are

hedging as a summary two days combined

us Market down significantly in line

with that gift Nifty and IND are all

indicating the negative trade today in

addition Market will be reacting to this

new f&o rules so all those stock market

business related stocks also will be on

Focus about the things should look out

during our Market hours around 1: to 2

p.m. Europe and UK's PMI data is due and

in the aftermarket hours for us their

service payment data and usual weekly

job insurance claims are some of the

items we need to keep an eye out today

coming to technical after a complete

sell off on Monday then on Tuesday Nifty

opened positive but was in the rangeb

movement throughout the session thus on

the daily chart Nifty formed the doe

pattern with a continuation of lower

high and lower low formation and with a

negative crossover in the RSI momentum

indicator which all indicate the

negative sign so as long as Nifty

remains below

25,900 we can expect the weak sentiment

and I expect 25650 to act as a support

level and a bridge above 26,000 could

signal upward movement in the near

future then in case of Bank Nifty it

opened 130 points gap down and closed

below 53,000 Mark thus extended its fall

for the third day thus on the daily

chart Bank formed a small bullish

scandles pattern with a long upper

Shadow indicating selling pressure at

higher level however it managed to

defend the 21-day exper moving average

support 52,600 and on the higher side

53250 is the upper resistance regarding

the weekly options data the maximum call

option open was at 26,000 strike

followed by 26,500 and 26,200 with

maximum new call option writing at

26,500 strike followed by 25,800 and

25,900 on the put side the maximum open

address was at 25,000 strike followed by

25,800 and 25,600 with maximum new put

option writing at 25,000 strike followed

by 25,600 and 24,800 there from options

data 26,000 is the immediate resistance

with support at

25,600 so that's all in this video hope

you all got SM information please

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