Mumbai: The Bombay Stock Exchange (BSE) and the National Stock Exchange of India (NSE) will introduce mini derivative (futures and options) contract Sensex and the S&P CNX Nifty index, respectively, in the New Year.

To mini contracts aim to attract retail investors into the ever-growing derivatives market. The BSE will launch 'Sensex mini derivatives contracts' from 1 January 2008.

The small size of the contract would help woo retail investors as there would be comparatively lower capital outlay, trading costs, more precise hedging and flexible trading, BSE said in a release.

The mini derivative contract on indices (Sensex and Nifty) will have a minimum contract size of Rs1 lakh to begin with.

The introduction of mini derivative contracts follows the recommendations of the Derivatives Market Review Committee (DMRC) headed by M. Rammohan Rao.

The mini derivatives contracts would be in market lots of five. The security symbol for Sensex mini contracts would be MSX and would be available for one, two and three months along with weekly options.

Market regulator Securities and Exchange Board of India (SEBI) had approved introduction of seven new derivative products for the domestic market.

"The introduction of these products is a step intended to progressively encourage markets to move onshore,'' SEBI had said.

The existing risk containment and other measures applicable for existing exchange traded equity index derivative contracts shall also be extended to the mini derivative contract on index, the bourses said.