Putting all money in one stock is bad idea, by spreading the money across many stocks most of retail investors cannot play hedging in options as one lot of option needs like 8lakh worth of stock(eg taken: hdfcbank).
Reducing lot size to 50k-1lakh worth of stock will increase retail participation in option hedging and other strategies that involves idividuals to hold stock/money to buy stock.
so did NSE ever considered to reduce lot size of stock option before?
It is very unlikely.
Infact it was SEBI that increased contract size to discourage small investors in the first place.
see one such article Sebi raises minimum contract size -(indiatimes.com)
Anyway, if you want to get around this, there is an approximate way in which you calculate the Beta of your portfolio against say a benchmark like N50.
Then use Nifty Options to hedge.
Let say your portf beta is 1 bcos u hold mostly large caps
then, contract value of NF at 18K is 9L.
so for every 9L worth you correspond 1 LOT. If BETA is 2, then every 9L is roughly 2 lots.
The strategy you employ again depends on the Delta of the derivative you use to hedge, but in expiry/Excercise terms you can select a PE strike of Options below which you are covered.
You can even do it with Futures, but bottom-line is you need to know what and how to use.
It will only lead to more speculation which will hurt small traders more than the big ones