The regulator, through a circular issued earlier in May, had capped the maximum weight of the top constituent at 20 per cent and the combined weight of the top three at 45 per cent
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FRANCIS MASCARENHAS
The Securities and Exchange Board of India (SEBI) has proposed to adjust constituent weights in existing non-benchmark indices such as NSE’s Nifty Bank and BSE’s Bankex with derivatives.
The regulator, through a circular issued earlier in May, had capped the maximum weight of the top constituent at 20 per cent and the combined weight of the top three at 45 per cent. It also mandated that such indices carry at least 14 constituents. The objective, SEBI said, was to ensure broad-based indices and curb concentration risk.
Both NSE and BSE have submitted their preferences for implementing the changes. BSE’s Bankex, with 10 constituents but no ETFs tracking it, may undergo one-time restructuring. NSE’s Nifty Bank and Nifty Financial Services, however, have substantial ETF assets under management — ₹34,251 crore and ₹511 crore, respectively.
Given the large flows involved, NSE has suggested a phased glide path of four tranches over four months for Nifty Bank to prevent market disruption.
Market participants, including mutual funds and the Association of Mutual Funds in India, have largely supported retaining existing indices while rebalancing them, citing the need to preserve liquidity, brand identity, and avoid investor confusion.
SEBI has sought stakeholder feedback by September 8.
Published on August 18, 2025
