Sebi Approves Nifty FPI 150 Index Derivatives: What It Means For NSE And F&O Investors

Foreign investors have remained net sellers for the past eleven months. The selling continued in the first half of 2025 with foreign institutional investors making a net sale of Rs 3.45 lakh crore.

However,  in the first few days of July, foreign investors have turned net buyers of Indian equities making a net purchase of Rs 2,502.03 crore. Amid the change in investor sentiment, the Securities Exchange Board of India (Sebi) is looking at ways of bolstering the return of foreign inflows into India.

The regulator has allowed the launch of derivatives on an index designed specifically for foreign investors. According to a report by Bloomberg which cited sources privy to the matter, the National Stock Exchange of India is set to introduce futures and options tied to the Nifty India FPI 150 Index.

What Is The Nifty India FPI 150 Index

Notably, the Nifty India FPI 150 Index was launched in August last year. The index was launched to track the performance of 150 domestically listed stocks which are selected based on their ease of accessibility for foreign investors. The accessibility based criterion is similar to the methodology that global benchmark providers like MSCI Inc use for selecting constituents for their broad indices.

The regulator’s goal behind approving the index was to offer overseas funds a targeted and investable benchmark which aligns with their regulatory and liquidity requirements. By only featuring stocks which are ‘accessible’ for investors outside India, the index provides an actual representation of the investment opportunities available to foreign funds navigating the domestic Indian market.

Impact On The National Stock Exchange

The regulatory approval comes at a time when the National Stock Exchange (NSE) is preparing for its initial public offering (IPO). The exchange had earlier mentioned its plans to launch onshore derivatives on the Nifty FPI 150 gauge in its draft red herring prospectus.

The NSE generates a significant part of its total revenue from its derivatives segment, accounting for over two thirds of its income in the previous fiscal year. By adding a new suite of rupee contracts in Mumbai the exchange is likely to boost its overall trading volumes and open a fresh revenue stream.

Impact On F&O Investors

The introduction of new futures and options can potentially have positive implications for both foreign and domestic investors participating in the derivatives market.

For foreign portfolio investors, the onshore derivatives provide an efficient tool to hedge their equity portfolios in India without relying on the broader benchmark indices.

While dollar contracts for the Nifty India FPI 150 Index already exist in the offshore GIFT City, the new rupee contracts are set to offer investors direct onshore access which can bring them back to the Indian market.

On the other hand, domestic retail and institutional investors are expected to gain an additional avenue to participate in the market segments which can potentially attract foreign capital.

While the regulator has been tightening rules to reduce retail speculation in broader equity derivatives, the index seeks to offer investors a specialised instrument to capitalise on foreign investment trends.