Impact Of Derivative Expiry On Nifty 50 Stock Price Volatility

Abstract

The research question addressed is whether the change in regime to a monthly expiry of index-futures on the NIFTY 50 is related to greater volatility in the underlying index. It looks at 247 daily NIFTY 50 records and 248 NIFTY 50 futures records from 1 October 2025 to 30 September 2026, which is all during the updated Tuesday expiry rule that started for contracts expiring after September 2025. Twelve monthly expiry cycles created using NSS Data Ltd. National Stock Exchange of India (NSE) contract specifications from then onwards. We use the daily absolute log return of the NIFTY 50 as our main measure of volatility, and we check for robustness with Parkinson range and Garman-Klass volatility. We compare a matched baseline window (T-10 to T-6), two near-expiry periods (T-5 to T-3 and T-2 to T-1), the expiry day (T), and the following five days using Wilcoxon signed rank tests and a Friedman repeated-measures test, and we run a HAC regression. There isn’t a statistically significant rise in daily NIFTY 50 volatility on expiry day, or as expiry day gets closer; the average absolute log return is 0.574% in the baseline period, then goes up to 0.650% in T-5 to T-3, 0.694% in T-2 to T-1, and then drops to 0.520% on expiry day, with paired Wilcoxon p-values of 0.054, 0.110, and 0.519. futures trading volume, meanwhile, is much greater in the two and one day pre-expiry and the expiry windows, with trade volumes in these windows rising 55% and 57% respectively on the base period (with the increase being statistically significant in these windows). The evidence suggests, then, that volumes in the derivatives increase markedly as expiry approaches, but not that they increase underlying index volatility as a general year-long proposition. This adds to the mixed results seen in India and shows why we need to be careful when linking higher derivative volume to more volatility in the main market.