Context:
The Securities and Exchange Board of India (SEBI) has proposed a relaxation in index realignment norms to avoid sudden market disruptions, especially in the Nifty Bank index, which is heavily skewed towards HDFC Bank and ICICI Bank.
Background:
SEBI’s May 2025 Norms
- Weight of any single stock in non-benchmark indices capped at 20%.
- Combined weight of top three constituents capped at 45%.
- Indices must have at least 14 stocks (Nifty Bank currently has 12).
What is Nifty Bank Index?
- The NIFTY Bank index is a stock market index that tracks the performance of the Indian banking sector.
- It comprises the most liquid and large-capitalized banking stocks from both public and private sector banks.
Key Features:
- Introduced by NSE: 2003
- Number of Constituents: 12 banks (free-float market capitalization weighted).
- Weightage Method: Free-float market capitalization.
- Types of Banks Included:
- Public sector banks (e.g., SBI)
- Private sector banks (e.g., HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Axis Bank)
