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News Topical, Digital Desk : Market regulator SEBI has made a major change to the rules for the Bank Nifty index. Under the new guidelines, the index will now require a minimum of 14 banking stocks. Furthermore, the weighting of any single bank will not exceed 20%. Currently, the combined weighting of HDFC Bank, ICICI Bank, and SBI is approximately 62%, which will now be reduced to 45%. This will impact both the banking index and derivatives trading.
Indian market regulator Securities and Exchange Board of India (SEBI) has issued new eligibility guidelines for Bank Nifty and other banking indices. This will have the biggest impact on the Nifty Bank Index, which will now include a total of 14 banks, compared to the current 12.
According to the SEBI circular, the combined weightage of the top three stocks in any index will no longer exceed 45%. Previously, this limit was up to 62%. Furthermore, the weightage of any single bank will not exceed 20%, up from the previously permitted 33%. Which banks will be most affected? The shareholdings of the top three banks in Nifty Bank—HDFC Bank, ICICI Bank, and State Bank of India (SBI)—will now be gradually reduced. By September 2025, HDFC Bank's weightage is 28.49%, ICICI Bank's 24.38%, and SBI's 9.17%. Following these, Kotak Mahindra Bank (8.97%) and Axis Bank (8.78%) complete the top five. Following the implementation of SEBI's new regulations, the dominance of HDFC and ICICI Bank will weaken somewhat, while mid-sized and public sector banks will gain more space. Four new banks are set to enter! Under the new guidelines, Yes Bank, Indian Bank, Union Bank of India, and Bank of India are likely to be included in Bank Nifty. This will make the index more diverse and representative. SEBI has stated that these changes will be completed in four phases by March 2026. The first adjustment will be implemented in December 2025. This means that the weightings of all banks will be gradually balanced to avoid unilateral pressure on the market. How much money will be invested? According to a report by Nuvama Alternative & Quantitative Research, if Yes Bank and Indian Bank are added to Bank Nifty, they could receive inflows (foreign investment) of up to $104.7 million and $72.3 million, respectively. If the four banks – Yes Bank, Indian Bank, Union Bank and Bank of India – are included, then an inflow of $107.7 million is expected in Yes Bank, $74.3 million in Indian Bank, $67.7 million in Union Bank, and $41.5 million in Bank of India. The shares of these banks witnessed a strong rally in the market today. Union Bank of India shares rose 4.4%, while Bank of India, Indian Bank and Yes Bank registered gains of 1.5% to 2.5%. According to reports, this move by SEBI will make the index more balanced and provide new opportunities for growth to smaller banks. At the same time, the overdominance of big banks will be reduced, which will also impact Bank Nifty ETF and banking sector funds.
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