Market Lot
A market lot is the minimum standard trading unit for a particular security—particularly in the derivatives segment—defined by the stock exchange, below which a transaction cannot be placed.
The concept of a market lot formalises the minimum transaction size on Indian stock exchanges. In the equity cash market, the minimum transaction is typically one share, meaning an investor can buy or sell a single share of any listed company. This has been the case since dematerialisation and the shift away from physical share certificates, which historically came in fixed lots.
However, in the derivatives segment, the market lot—also called the lot size—is a critical parameter. Each futures or options contract on NSE or BSE represents a specified number of underlying shares. For example, if the lot size of Reliance Industries futures is 250, then one futures contract represents 250 shares of Reliance. An investor cannot trade half a contract; the minimum is one lot of 250 shares.
SEBI periodically reviews and revises lot sizes for derivatives contracts. The general principle governing lot size is that the notional value of one contract should fall within a specified band—historically between ₹5 lakh and ₹10 lakh per contract, later revised upward. Exchanges compute the lot size by dividing the target contract value by the prevailing market price of the underlying. As stock prices move over time, exchanges revise lot sizes (usually on a periodic review schedule) to keep the contract value within the target band.
For equity index derivatives like Nifty 50 and Bank Nifty futures, the lot size is fixed by NSE. Nifty 50's lot size was 50 units for many years before being revised to 75 and later reviewed again. Bank Nifty was revised from 25 to 15 following the significant rise in its index level.
In the SME IPO segment, BSE and NSE require a minimum application lot size—typically ₹1 lakh worth of shares—ensuring that SME IPOs attract reasonably engaged investors rather than speculative small-ticket applications. This is distinct from the lot size concept in derivatives but stems from the same market design principle of establishing meaningful minimum participation units.