Sebi caps weights in Bank Nifty, tightens index rules to broaden representation
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Market regulator Securities and Exchange Board of India (SEBI) has imposed a cap on the weights of top constituents in non-benchmark indices such as Bank Nifty, in a move aimed at reducing concentration risk and ensuring broader market representation. Under the revised framework, the top constituent's weight cannot exceed 20%, while the combined weight of the top three stocks must be capped at 45%. The new norms, issued through a circular under Section 11 of the SEBI Act, apply to popular non-benchmark indices, including BANKNIFTY, BANKEX, and FINNIFTY. SEBI has also introduced a minimum constituent requirement, mandating that each of these indices must comprise at least 14 stocks to qualify for derivative trading. This is expected to make the indices more diversified and reflective of the underlying sector or theme. In line with the new rules, exchanges have been directed to rebalance the weights of the existing constituents. Live Ev...