The requirements for equities to be added to the futures and options (F&O) sector have been updated by market regulator SEBI. This might pave the way for the deletion of 23 stocks, including Gujarat Gas Ltd, City Union Bank Ltd, and Bata India Ltd, from the derivatives section and the addition of roughly 80 stocks, including YES Bank Ltd, Rail Vikas Nigam Ltd (RVNL), Cochin Shipyard Ltd, and Mazagon Dock Shipbuilders Ltd. According to Nuvama Institutional Equities, two stocks—Zomato and Jio Financial Services (JFS)—may potentially receive Nifty admission in the event of F&O inclusions.

The standard for a stock's six-month market-wide position limit (MWPL) was raised from Rs 500 crore to at least Rs 1,500 crore in SEBI's updated criteria list. The cash market criteria's average daily delivery value was previously set at Rs 10 crore, but it has now been raised to at least Rs 35 crore. The Median Quarter Sigma Order Size (MQSOS) for the stock was also modified by SEBI, going from Rs 25 crore to Rs 75 crore. The market regulator pointed out that the MQSOS criterion would need to climb three to four times, as the average market turnover was 3.5 times more than the amount during the previous review.

In terms of inclusions, our research indicates that around 80 names meet the requirements for F&O inclusion. It becomes obvious that SEBI wants to add more stocks to derivatives given that new entries haven't been made in years. Twelve on the highlighted list ought to get in during the next few months, according to Nuvama.

IRFC, Jio Financial Services, and Zomato Ltd. are the top three competitors looking to join the F&O market. Other possible F&O entries include PB Fintech, HUDCO, LIC, Union Bank, BSE, RVNL, NHPC, IREDA, Mazagon Dock, YES Bank, Varun Beverages, Cochin Shipyard, and PB Fintech.

"As per our understanding from the circular, SEBI can introduce new inclusions in next few weeks/months," Nuvama stated.

It said that the performance-based departure criteria would take effect three months following the circular's release date. Therefore, the departure evaluation should ideally take place in December 2024, with exclusions following in the next months.

F&O exclusions might apply to a number of stocks, including those of Abbott India, Atul, Indiamart Intermesh, Citi Union Bank, Bata India, IPCA Labs, Sun TV, and Gujarat Gas.