NCFM Capital Market (Dealers) cheat sheet

NSE settlement is T+1 for equities; the exchange acts as central counterparty through NSE Clearing Ltd, so counterparty default risk is mutualised via the Settlement Guarantee Fund.

Delivery versus payment: pay-in of funds and securities happens on T+1; a short delivery triggers the exchange's auction/closing-out mechanism, not a bilateral claim between buyer and seller.

Price bands: stocks in the F&O segment have no fixed daily band but have a 10% dynamic price band that flexes in 5% steps; illiquid/non-F&O scrips carry 2%, 5%, 10% or 20% fixed bands.

Circuit filters halt trading in a scrip when the price hits the band; index-level market-wide circuit breakers trigger at 10%, 15% and 20% movement on Sensex/Nifty, with the halt duration depending on time of day.

Order types: market, limit, stop-loss (SL) and SL-M; a limit order executes only at the specified price or better, while an SL order becomes active only when the trigger price is touched.

Rolling settlement vs. T+1: trade date is T, obligations are determined at end of T, and pay-in/pay-out occurs on T+1; positions carried beyond settlement must be squared off or converted to delivery.

Bulk deal threshold on NSE is 0.5% of the total listed shares of a company; block deal window is a separate 35-minute session with a minimum value of Rs 10 crore per trade.

Insider trading is regulated by SEBI (Prohibition of Insider Trading) Regulations, 2015: trading window closure, code of conduct, and disclosure of holdings by promoters and key managerial personnel.

Nifty 50 is a free-float market-capitalisation weighted index of 50 large-cap stocks; weight of a stock = (free-float market cap of stock) / (sum of free-float market caps of all constituents).

Free-float excludes promoter holding, government holdings, strategic stakes and locked-in shares; it is the investable portion of the share capital.

Index divisor: Index = (Total free-float market cap) / (Divisor); the divisor is adjusted for corporate actions (splits, bonuses, rights) so that the index level is not distorted.

Reconstitution of Nifty 50 happens semi-annually (March and September), based on liquidity, float-adjusted market cap and trading frequency over the preceding six months.

Sectoral indices (e.g., Nifty Bank, Nifty IT) use the same free-float methodology but restrict constituents to a defined industry; Nifty Bank has 12 constituents.

Total return index (e.g., Nifty 50 TR) reinvests dividends and thus rises faster than the price index; the difference approximates dividend yield over time.

Index impact cost measures the cost of executing a standard basket relative to the ideal price; a lower impact cost indicates better liquidity and is a selection criterion for inclusion.

A stock's index weight changes when its free-float market cap changes (fresh issue, buyback, promoter stake change) or when the divisor is adjusted; passive funds must rebalance accordingly.

Futures price = Spot × e^(r−d)T in continuous compounding, or approximately Spot × [1 + (r − d) × T]; r is the risk-free rate and d the dividend yield.

Cost of carry / fair value = Spot + carry − dividends; when futures trade above fair value the market is in contango, below it is backwardation.

Put-call parity for European options: C − P = S − K × e^(−rT); a violation creates arbitrage via a conversion or reversal.

Option premium = intrinsic value + time value; intrinsic value of a call = max(S − K, 0) and of a put = max(K − S, 0).

Greeks: delta measures change in premium per unit change in spot; gamma is the change in delta; theta is time decay; vega is sensitivity to implied volatility; rho is sensitivity to interest rate.

Lot sizes on NSE F&O are set per underlying (e.g., Nifty 50 and Bank Nifty have prescribed lots); the contract value at introduction must be roughly Rs 5–10 lakh.

Margins: SPAN margin plus extreme loss margin (ELM) for futures; option sellers post SPAN + ELM, option buyers pay only premium. Mark-to-market is settled daily in cash.

Index options on NSE are European and cash-settled; stock options are American and physically settled at expiry. Expiry is the last Thursday of the contract month (adjusted for holidays).

Open interest is the number of outstanding contracts; rising OI with rising price suggests long buildup, rising OI with falling price suggests short buildup.

On NSE, USD/INR futures are quoted as rupees per USD and are cash-settled against the RBI reference rate on the last trading day.

Contract sizes: USD/INR futures have a market lot of USD 1,000; EUR/INR, GBP/INR and JPY/INR have their own prescribed lots.

Tick size for USD/INR futures is 0.25 paise (Rs 0.0025); for other pairs it is 0.25 paise as well, and the value of one tick per lot is Rs 2.50 for USD/INR.

Expiry cycle: currency futures expire on the last business day of the month, two working days before the last business day of the month for the near month contract on NSE.

Initial margin for currency futures is computed using a VaR-based SPAN-like model plus an extreme loss margin; minimum initial margin is prescribed by SEBI/exchange circulars.

Residents may take positions in currency futures only for hedging an underlying exposure; a declaration of the underlying exposure is required, and positions beyond prescribed limits need exchange approval.

Options on USD/INR are European and cash-settled; the premium is quoted in rupees and paid upfront by the buyer.

FEMA governs cross-border currency transactions; forward contracts with AD banks require an underlying exposure, while exchange-traded futures are permitted for hedging with a declaration.

Bond price = Σ [C / (1+y)^t] + F / (1+y)^n, where C is coupon, F face value, y yield to maturity and n periods; price and yield move inversely.

Clean price excludes accrued interest; dirty (settled) price = clean price + accrued interest, where accrued = coupon × days since last coupon / days in coupon period.

Duration: Macaulay duration is the weighted average time to cash flows; modified duration = Macaulay duration / (1 + y/m), and % price change ≈ −modified duration × Δy.

Convexity adjusts the duration estimate: % price change ≈ −D_mod × Δy + 0.5 × convexity × (Δy)^2; it matters more for large yield moves and long-maturity bonds.

Yield curve shapes: normal (upward sloping), inverted (downward sloping), and flat; an inverted curve signals expected rate cuts or near-term stress.

G-sec settlement in India is T+1 on the RBI's Negotiated Dealing System–Order Matching (NDS-OM); corporate bonds typically settle T+1 or T+2 depending on the platform.

Credit rating scale (CRISIL/ICRA/CARE): AAA is highest safety, then AA, A, BBB (investment grade down to BBB−); BB and below are speculative/non-investment grade.

Treasury bills are zero-coupon, issued at a discount and redeemed at face value; the implicit yield = (F − P)/P × 365/days to maturity.

SEBI (Issue and Listing of Debt Securities) Regulations govern public issuance of debt; private placement to institutional investors is governed by the Companies Act and SEBI circulars.

T+1 settlement cycle on NSE; NSE Clearing Ltd is the central counterparty and the Settlement Guarantee Fund covers default.

Price bands: no fixed band for F&O stocks but a dynamic 10% band; non-F&O scrips have 2%, 5%, 10% or 20% fixed bands.

Market-wide circuit breakers trigger at 10%, 15% and 20% index movement; halt duration depends on time of day.

Bulk deal threshold: 0.5% of total listed shares; block deal window is a separate 35-minute session with a minimum Rs 10 crore per trade.

Insider trading governed by SEBI (Prohibition of Insider Trading) Regulations, 2015: trading window closure and disclosure obligations.

Order types: market, limit, SL and SL-M; SL orders activate only when the trigger price is touched.

Settlement obligations are determined at end of trade date T; pay-in and pay-out occur on T+1.

Nifty 50 is a free-float market-cap weighted index of 50 large-cap stocks; weight = stock free-float market cap / total free-float market cap.

Free-float excludes promoter, government and strategic holdings and locked-in shares; only the investable portion counts.

Index = total free-float market cap / divisor; the divisor is adjusted for corporate actions to keep the index level undistorted.

Nifty 50 reconstitution is semi-annual (March and September), based on liquidity, float-adjusted market cap and trading frequency.

Total return indices reinvest dividends and rise faster than price indices; the gap approximates dividend yield.

Impact cost measures execution cost of a standard basket versus ideal price; lower impact cost signals better liquidity.

Sectoral indices such as Nifty Bank use the same free-float methodology with industry-restricted constituents.

Futures fair value ≈ Spot × [1 + (r − d) × T]; r is risk-free rate, d dividend yield.

Put-call parity (European): C − P = S − K × e^(−rT); a violation allows conversion/reversal arbitrage.

Premium = intrinsic value + time value; call intrinsic = max(S − K, 0), put intrinsic = max(K − S, 0).

Greeks: delta (premium vs spot), gamma (delta vs spot), theta (time decay), vega (implied volatility), rho (interest rate).

Margins: SPAN + ELM for futures and option sellers; option buyers pay premium only; MTM settled daily in cash.

NSE index options are European and cash-settled; stock options are American and physically settled at expiry.

Expiry is the last Thursday of the contract month, adjusted for holidays.

Open interest: rising OI with rising price = long buildup; rising OI with falling price = short buildup.

Lot sizes are set per underlying so that contract value at introduction is roughly Rs 5–10 lakh.

USD/INR futures on NSE are quoted in rupees per USD and cash-settled against the RBI reference rate on the last trading day.

USD/INR futures market lot is USD 1,000; EUR/INR, GBP/INR and JPY/INR have their own prescribed lots.

Tick size is 0.25 paise (Rs 0.0025); one tick per USD/INR lot is worth Rs 2.50.

Currency futures expire on the last business day of the month, two working days before the last business day for the near month on NSE.

Initial margin is VaR-based plus an extreme loss margin, with minimums prescribed by SEBI/exchange circulars.

Residents may take currency futures positions only against an underlying exposure, with a declaration; excess positions need exchange approval.

Options on USD/INR are European and cash-settled; premium is quoted in rupees and paid upfront by the buyer.

FEMA governs cross-border currency transactions; forward contracts with AD banks require an underlying exposure.

Bond price = Σ C/(1+y)^t + F/(1+y)^n; price and yield move inversely.

Dirty price = clean price + accrued interest; accrued = coupon × days since last coupon / days in coupon period.

Modified duration = Macaulay duration / (1 + y/m); % price change ≈ −modified duration × Δy.

Convexity adjustment: % price change ≈ −D_mod × Δy + 0.5 × convexity × (Δy)^2.

Yield curve shapes: normal (upward), inverted (downward) and flat; inversion signals expected rate cuts or stress.

G-sec settlement in India is T+1 on NDS-OM; corporate bonds typically settle T+1 or T+2 depending on the platform.

Credit rating scale: AAA highest safety, then AA, A, BBB (investment grade down to BBB−); BB and below speculative.

Treasury bills are zero-coupon, issued at a discount; implicit yield = (F − P)/P × 365 / days to maturity.

SEBI (Issue and Listing of Debt Securities) Regulations govern public issuance of debt securities.