Definition
Index Futures vs Stock Futures
Index futures track a basket like Nifty and settle in cash, while stock futures track a single company and settle physically.
Index futures (Nifty, Bank Nifty, Fin Nifty) give exposure to a whole market segment, are highly liquid, and are cash-settled at expiry. Single-stock futures track one company such as Reliance or HDFC Bank, tend to be less liquid, and are physically settled — meaning delivery of shares if held to expiry.
For Indian traders this drives different risk management: index futures avoid delivery surprises and stock-specific gaps, while stock futures carry company news risk and an expiry-week delivery obligation. Margins, lot sizes, and the SEBI-mandated extra delivery margin near expiry also differ between the two.
Related terms
- Nifty 50The Nifty 50 is the NSE's free-float market-cap-weighted benchmark index tracking 50 of India's largest, most liquid companies across sectors.
- Futures ContractA futures contract is a binding agreement to buy or sell an asset at a fixed price on a set future date, with both parties obligated to honour it.
- Physical vs Cash SettlementPhysical settlement delivers the actual shares at expiry, while cash settlement just exchanges the profit or loss in money.
- Lot SizeLot size is the fixed minimum quantity in which a futures or options contract trades — you cannot trade a single unit in F&O.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.