SEBI Proposes Realignment of Bank Nifty and BSE Bankex Indices to Curb Concentration Risk

India's Securities and Exchange Board (SEBI) has moved to reshape the country's banking indices, targeting excessive concentration in flagship products like NSE's Nifty Bank and BSE's Bankex. The May circular imposes hard limits—20% cap for top constituents, 45% combined weight for top three—while mandating at least 14 components per index.

Exchanges face divergent challenges. BSE's 10-stock Bankex, untethered to ETFs, may undergo swift restructuring. NSE's Nifty Bank and Financial Services indices—with ₹34,251 crore and ₹511 crore in ETF assets respectively—require delicate handling. The proposed four-month phased adjustment seeks to prevent market dislocations.

Asset managers rally behind index preservation, arguing for rebalancing over replacement to maintain liquidity and investor familiarity. The September 8 feedback deadline looms as market participants weigh structural stability against regulatory risk controls.