SEBI Shakes Up Bank Nifty: New Weight Caps to Reduce Concentration Risk

The new norms were implemented to reduce concentration risk and ensure broader, balanced market representation, according to market regulator.

The index will now require a minimum of 14 constituents, an increase from the current 12. The weight of the top constituent will be limited to 20 per cent, reduced from 33 per cent. Additionally, the combined weight of the top three constituents cannot exceed 45 per cent, down from 62 per cent.

SEBI’s new norms will also rejig BSE’s Bankex and NSE’s FinNifty indices by adjusting the weights of individual stocks within these indices.

Regarding Bank Nifty, the heavyweights HDFC Bank, ICICI Bank, and State Bank of India will see their weights reduced gradually in four tranches, concluding on March 31, 2026.

The first adjustment in Bank Nifty is set for December 2025, followed by three additional rebalancings.

The new norms for derivatives on non-benchmark indices aim to mitigate risk for investors and funds, according to the regulator.

The compliance with prudential norms may be implemented through constituent or weight adjustment in a single tranche for the two indices Bankex and FinNifty, the statement said.

The effective date for implementation of eligibility criteria for derivatives Bankex and FinNifty has been revised to December 31, 2025.

In each adjustment, the weight of the top three constituents would be checked, and if the weights are beyond the prudential norms, the excess would be targeted for reduction equally over the remaining tranches, the market regulator said.

The Bank Nifty constituents include IDFC First Bank, Canara Bank, Punjab National Bank, Federal Bank, Bank of Baroda, State Bank of India, AU Small Finance Bank, Axis Bank, IndusInd Bank, HDFC Bank, ICICI Bank, and Kotak Mahindra Bank.

- IANS