NIFTY FIFTY DERIVATIVE TRADING STRATEGY: A HEURISTIC MODEL APPROACH

Abstract

This study aims to present a heuristic model that can be utilised by small retail traders in derivative trading strategies. In addition, it is to evaluate the performance of the Nifty 50 index within the Indian stock market. The objective is to gain a deeper understanding of strategies for optimising profits and determine the key factors that impact profitability. The research methodology employed Zerodha as a platform for accessing secondary data sources. The researchers employed purposive sampling methodology, selecting participants based on specific criteria, during a designated one-year timeframe spanning from 2022 to 2023, in order to gather pertinent data. The findings of this research indicate that the financial services industry possesses substantial market capitalization in comparison to other industries, thereby implying its significance in the construction of investment portfolios. The study additionally emphasizes a notable augmentation in overall and mean profits across diverse sectors, notably in May 2022, suggesting potential prospects for profitability and expansion. Moreover, it is imperative to comprehend the ownership framework, given that a substantial proportion of the shares are held by entities distinct from investors. This highlights the importance of taking into account the potential effects of external ownership on the performance of stocks when making investment choices. The analysis of trends reveals that the return on investment (ROI) exhibited an upward trajectory in May 2022 and January 2023. Nevertheless, during the period spanning from June to December, the return on investment (ROI) failed to meet the predetermined expectations. This outcome highlights the significance of diligently monitoring the various factors that exert influence on ROI, thereby enabling informed decision-making in the realm of investments. An analysis of trade patterns associated with both successful and unsuccessful outcomes yields intriguing observations. The study displays a success rate of 79% in predicting data, suggesting a relatively high degree of precision. The tests conducted to assess independence indicate that specific variables, including the total number of trades, winning trades, and losing trades (both actual and forecasted), do not exhibit statistically significant relationships. In contrast, the assessment of investment success is underscored by the significant relationship between actual and forecasted ROI (Return on Investment). Based on the aforementioned findings, it is recommended that investors take into account the market capitalization of the Financial Service industry and closely monitor industry trends and financial indicators. This study enhances the comprehension of Nifty 50 derivative trading and offers valuable insights that can guide investment strategies and decisions for individual retail traders.