The National Stock Exchange (NSE) recently announced a significant change, reducing the lot size for four major indices in the Futures & Options (F&O) segment. This decision will apply to Nifty 50 and three other indices, directly impacting millions of retail investors.
Effective from October 28, 2025, this move is aimed at making the market more accessible and encouraging participation from smaller investors. Let us take a closer look at what this change entails and its implications for investors.
What’s Happening?
On October 03, 2025, NSE issued a circular reducing the lot size of Nifty 50 futures and options contracts from 75 to 65. Similarly, the lot size for Nifty Bank has been reduced from 35 to 30, Nifty Financial Services from 65 to 60, and Nifty Mid Select from 140 to 120. The lot size for Nifty Next 50, however, remains unchanged.
The purpose of this change is to adjust the total value of contracts to make them more precise and accessible, while slightly reducing margin requirements. This step aligns with SEBI’s guidelines to review contracts every six months, ensuring balanced risk and exposure.
Impact on Transactions
The reduction in lot size will decrease the total contract value, making F&O trading more affordable for new and small investors. For instance, previously, a Nifty 50 lot of 75 units at 24,800 would have a contract value of approximately Rs 1.86 lakh, whereas the new lot size of 65 reduces it to around Rs 1.61 lakh. Correspondingly, the margin requirement will drop from about Rs 2.04 lakh to Rs 1.77 lakh.
However, the overall impact on retail investors will be limited, as the margin reduction is marginal. Additionally, some contract combinations may see temporary closures of their day-spread order books to ensure smooth trading and clearing processes.
What’s in it for Investors?
Retail traders stand to benefit the most from the new rules. Smaller lot sizes allow them to trade F&O with lower capital, reducing risk. Moreover, this initiative by NSE is expected to enhance market transparency and potentially increase volumes in the futures and options market.
Investors, however, will need to adjust their trading strategies according to the new lot sizes and be mindful of certain limitations in the day-spread order book to manage risk effectively. This is the time for investors to stay informed and make the most of these changes.
What’s Next?
The circular takes effect from October 28, 2025 (EOD). For weekly and monthly contracts, existing lot sizes will remain until expiry on December 30, 2025, while lot sizes for quarterly and half-yearly contracts will be revised on the same day (EOD).
Additionally, NSE has stated that the day-spread order book will not be available for combination contracts from November 2025 to February 2026. The exchange has advised all members to inform their clients about the new system promptly to ensure smooth trading without disruption.
*The article is for information purposes only. This is not investment advice.
*Disclaimer: Teji Mandi Disclaimer
