So a Bosch at Rs. 20,000 a share will likely see a lot size of 25. (Currently: 125). But a Nifty’s lot size will change from the current 25 shares to probably 75 shares.
This will impact derivatives volumes, for sure. There are a lot of retail participants attracted to a 25 lot size on the Nifty, and too many of them are undercapitalized for trade. However the higher lot size creates serious impediments to shorting options, which has also become a retail obsession recently. Overall, there is likely to be market impact as it happens, but it will result in lower volumes initially.
If you think about it, the lot size of 2 lakh has been the same for 10 years. It’s high time we increased it if the logic was to keep the smaller traders out of it. While I don’t like that logic, the power of leverage is often abused at the lowest lot level, so it might just benefit the market in the longer term.
Here’s the circular: