SEBI F&O criteria: Jio Financial, Zomato among 80 likely inclusions, 18 stocks may be excluded from derivatives segment

Zomato, Jio Financial Services, IRFC, Rail Vikas Nigam Ltd. (RVNL), IREDA, Mazagon Dock Shipbuilders, Adani Green Energy and IRCON shares are among the 80 stocks that could enter the futures and options (F&O) segment of the Indian stock market as per the new methodology prescribed by Sebi.

Capital markets regulator Securities & Exchange Board of India (SEBI) revised the rules on eligibility criteria for entry and exit of stocks in the derivatives segment. In a circular issued on August 30, Sebi raised the median quarter sigma order size (MQSOS) to at least ₹75 lakh.

Under the revised norms, the stock’s market-wide position limit (MWPL) has been increased to ₹1,500 crore from ₹500 crore and the average daily delivery value in the cash market in the previous six months must be at least than ₹35 crore.

The circular is effective immediately, and a six-month gestation period has been given to existing stocks to meet the new norms.

According to the new norms, close to 80 stocks qualify for F&O inclusion, while around 18 stocks have a strong chance of being excluded, as per calculations of Nuvama Alternative & Quantitative Research. However, the final decision remains with SEBI.

The earliest exclusion review could occur in December 2024, with any exclusions from the derivatives segment taking effect in February 2025 or later.

Jio Financial Services and Zomato are strong contenders to make it into the F&O segment. The new F&O Inclusions could also propel these two stocks into the Nifty 50 in the 2025 rejig.

“The real excitement kicks in if F&O inclusion for both these names happens within the next few months. According to Nuvama Alternative’s calculations, this could pave the way for Zomato and Jio to enter the Nifty 50 in the March 2025 review. Imagine that! Our Nifty 50 could soon better reflect the current market business trends and feature these powerhouse businesses in the index,” said Abhilash Pagaria, Head - Nuvama Alternative & Quantitative Research.

Likely inclusions and exclusions in F&O market

Among other prominent stocks that could be included in the F&O segment due to the revised norms are Yes Bank, Varun Beverages, Life Insurance Corporation of India (LIC), BSE, Avenue Supermarts, CDSL, Adani Energy Solutions, One 97 Communications (Paytm), Adani Total Gas, BEML, Tata Technologies, FSN E-Commerce Ventures (Nykaa), Cyient, Tata Elxsi and IIFL Finance, among others.

On the contrary, the 18 stocks that currently face removal from the F&O segment as per the new methodology include Abbott India, Sun TV Network, Metropolis Healtcare, Gujarat Gas, Granules India, Can Fin Homes, Mahanagar Gas, Bata India, United Breweries, City Union Bank, IDFC and Dr Lal Pathlabs, among others.

Meanwhile, a PSF Framework will be used to evaluate the exit of stocks. While PSB criteria exclusion review will not happen sooner than March 2025, the exclusion based on this criteria will at least take 8 to 9 months from now.

It's important to note that the exclusions are purely quantitative-driven, while SEBI will provide the final direction for selecting stocks for inclusion, Nuvama said.

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