Sebi increases Bank Nifty stocks to 14 from 12, caps top stock's weight

As per the new rules, the index must include a minimum of 14 constituents, compared with the current 12, while the weight of the top constituent will be capped at 20% - down from 33% presently.

Sebi on Bank Nifty: The Securities and Exchange Board of India (Sebi) has notified new prudential norms for derivatives on the Nifty Bank Index (Bank Nifty), mandating a broader and more balanced composition. 

 

As per the new rules, the index must include a minimum of 14 constituents, compared with the current 12, while the weight of the top constituent will be capped at 20 per cent – down from 33 per cent presently. 

 

Additionally, the combined weight of the top three constituents cannot exceed 45 per cent, compared with 62 per cent now.

 

The changes, aimed at reducing concentration risk and improving diversification, will primarily impact the top three heavyweights, which include HDFC Bank, ICICI Bank, and State Bank of India, whose weights will be gradually reduced in four tranches until March 31, 2026.  

Currently, 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, Kotak Mahindra Bank.

 

The first adjustment will take place in December 2025, followed by three more rebalancing rounds.

 

Sebi noted that the rebalancing process will be gradual to ensure ‘orderly adjustment of assets under management (AUM)’ in funds tracking the index. 

 

The freed-up weights from the top banks will be redistributed among other constituents, with potential new entrants such as YES Bank, Indian Bank, Union Bank of India, and Bank of India under consideration.

 

For other financial indices, BSE’s Bankex and NSE’s FinNifty, the adjustments will be implemented in a single tranche by December 2025. 

 

The move follows Sebi’s May 2025 circular setting eligibility criteria for derivatives on non-benchmark indices to ensure better risk management and investor protection.