What is Bank Nifty? & How is it calculated?

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What is Bank Nifty? & How is it calculated?

What is Bank Nifty Meaning, How is it calculated & What is the lot size of bank nifty?:

Bank Nifty is a standard for investing in stocks in the banking sector.

It is worthwhile to mention that there are broad indices as well as sectoral indices.

Bank Nifty falls into the latter category, i.e., sectoral indices.

Bank Nifty also called a “BNK”

What is Bank Nifty Meaning?

The Bank Nifty is a stock market index specifically designed to track the banking sector.

Bank Nifty was created by NSE in September 2003 to have the free flow movement of the capital market performance of one of the critical service sectors of India, i.e., banking.

It comprises the stocks having the highest market capitalization and the highest liquidity quotient.

Both public and private sector banking stocks are included in this sector.

There are a total of 12 stocks in this entire banking segment:

  1. SBI
  2. PNB
  3. IndusInd Bank
  4. ICICI Bank
  5. Bank of Baroda
  6. Axis Bank
  7. RBL Bank
  8. Kotak Mahindra Bank
  9. IDFC First Bank
  10. HDFC Bank
  11. Bandhan Bank
  12. AU Small Finance Bank

Why are only 12 bank stocks included in the index?

There are mainly two reasons for including only 12 stocks in the index.

They are as follows:

  1. Only the best-performing, market-leading banking companies are included in the index.
  2. Not all banks are listed on the stock exchange, and if the stock is not listed, its price performance cannot be tracked. However, not all the listed banking companies are a part of the index. For example, banks such as Union Bank, IDBI Bank, Central Bank of India, and Maharashtra bank are listed but are not a part of the bank nifty index.

Not a single bank stock has a weight of more than 30% in the index, whereas the weight of the top three stocks together comprises 62% of the overall index.

What is the price of the bank nifty?

The value of the bnk symbolizes the bank stocks, and the entire bank nifty index is updated in real-time on a trading day just like other stocks.

The NSE keeps a record of the prices and the movements of the bank stocks, and we can find the latest price and the trend of the bnk index from its own website or through our brokers.

How is Bank Nifty calculated?

For any sort of stock market index calculation, there is a base date and a base value.

The base date is referred to as the first date from which that index has been tracked, whereas the base value means the value that is assigned to the index on that date.

How is Bank Nifty calculated
Image Credited: Trading Fuel || Research Lab

For Bank Nifty, the base date is January 1st, 2000, and the base value is Rs 1000 as decided by NSE.

Not every bank is assigned the same weight. Bigger companies, such as HDFC bank, have a higher weightage, whereas smaller companies like PNB have a lower weightage.

This weightage is decided based on the free-float market capitalization method.

The entire list of the bank nifty index can be tracked here- https://www.moneycontrol.com/indian-indices/nifty-bank-23.html

How frequently is the Bank Nifty calculated?

The value of the bank nifty is calculated on a real-time basis.

The price of all the 12 stocks changes every second, or rather every fraction of a second, which can be tracked on a real-time basis, and the same can be tracked through your broker’s terminal as well.

How can we trade in Nifty Bank?

There are 2 ways through which we can trade in the Bank Nifty.

If you are bullish on BNK, then you can buy its future, whereas if you are bearish, then you can short sell it.

Both the futures and options contracts for the next 3 months are available on the exchange.

The bank nifty option chain is the list of all the options expiring on a particular date, which are exasperatedly sorted in the order of the strike price.

The Bank Nifty future is based on volatility and open interest (OI).

Also Like: How to do Bank Nifty Intraday Option Trading?

What is the lot size of Bank Nifty?

The lot size refers to the number of future and option contracts clubbed together for trading.

The lot size is comprised of 25 contracts, which are grouped together. You can trade in multiples of 50, 75, 100, etc.

A lot of derivative contracts standardize the contracts and help the trader know exactly the exact number of contracts being bought in a trade.

The lot size may differ depending on the price and volume of the security being traded.

You also like: What is FinNifty?

What is the Bank Nifty expiry?

It refers to the end of the validity of the derivative instrument with bnk as its underlying asset.

The expiry date of all the derivatives is the last Thursday of every month, but if the last Thursday is a holiday, then the working day before last Thursday will be considered as the expiry day.

When it comes to the settlement of the bnk F & O contracts, the underlying asset has to be delivered or received by the related party by way of cash settlement.

What is BNK option chain?

The bank nifty option chain is useful, or we can say very popular, among all the F & O traders.

An option chain is the link or the webpage with all the key information about the contract of the stock or index and includes the details such as open interest, implied volatility, volume, the last traded price, the bid as well as ask quantity for both the call and put options at all the strike prices at which the option contract is available in the market.

The option derivative list can be available here- https://www.nseindia.com/option-chain

The BNK option chain allows the trader to identify the support and resistance levels.

The above chart will also change with the changes in the spot price of the BNK index.

Also Read: What are Nifty and Sensex?

What are the important points to note for BNK?

The main points to note for bank nifty are:

What are the important points to note for BNK
Image Credited: Trading Fuel || Research Lab

Is BNK absolutely relevant?

The Indian banking space is a huge ocean.

The following are included in the Indian banking space:

No. of banksSector
12Public sector
22Private sector
49Foreign banks
56Regional rural banks
1562Urban co-operative banks
94,384Rural co-operative banks

The formula for the BNK index is designed in such a way that it becomes comparable against the constituents of the market, i.e. the bank nifty stocks.

The performance of all BNK stocks on the bourse can be measured against the index, providing equity shareholders and other day traders with an additional tool in addition to the overall market index, i.e., the Nifty 50.

The Indian stock market just doesn’t have the bank nifty, but it also has the S&P BSE Bankex, on the other hand.

The main differences between the two are as below:

BasisS&P BSE BankexBank Nifty
No. of stocks1012
Trading volumeLess as compared to bank niftyHuge trading volume
ProgressionMore progressive as it shows the ESG (environment, social, and governance) factorLess progressive

Bank nifty is considered to be a good stock for earning more profit. However, at times, it is quite risky because of its volatility.

Frequently Asked Questions (FAQs)

A. The Bank Nifty is a stock market index specifically designed to track the banking sector.
A. It came into force in September 2003.
A. Everyone can trade in the bank nifty either through their mobile applications or through their brokers.
A. In total, 12 banking stocks make up the bank nifty index.
A. No, both are completely different.
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