Copyright thehindubusinessline
In an effort to reduce index concentration risk and for balanced representation of constituents, the Securities and Exchange Board of India (SEBI) has directed stock exchanges to implement revised eligibility criteria for derivatives on non-benchmark indices such as Bank Nifty, Bankex and Fin Nifty, The regulator has mandated exchanges to comply with the prudential norms specified in its May 2025 guidelines, including a minimum of 14 constituents, a cap of 20 percent on the top constituent’s weight, and a combined cap of 45 percent on the top three constituents. All other constituents must have descending weights. The rebalancing for Bankex (BSE) and Fin Nifty (NSE) will be implemented in a single phase by December 31, 2025. Meanwhile, Bank Nifty (NSE) will undergo a four-monthly phased adjustment, with full compliance required by March 31, 2026, “to ensure orderly rebalancing of assets under management (AUM)” of funds tracking the index. According to the circular, exchanges must adjust the constituents’ weights iteratively, redistributing excess weights from top constituents to smaller ones in line with prudential limits. The regulator aims to bring greater transparency and balance in derivative-linked indices, reducing risks from over-reliance on a few heavyweight constituents. The regulator had earlier sought public feedback in August on whether such compliance should be achieved through creating new indices or adjusting existing ones. Based on the inputs received and recommendations from the Secondary Market Advisory Committee (SMAC), SEBI opted for constituent and weight adjustments in the existing indices. Stock exchanges and clearing corporations have been instructed to make necessary changes to their systems, provide advance intimation to market participants and amend relevant rules and bye-laws to facilitate implementation. Published on October 30, 2025
