SEBI Caps Bank Nifty Weights at 20% to Cut Concentration Risk

SEBI Caps Bank Index Weights to Cut Concentration Risk

The Securities and Exchange Board of India (SEBI) has mandated significant changes to key financial indices like the Bank Nifty, aiming to actively reduce concentration risk. The new norms require a minimum of 14 stocks in the index, ensuring greater diversification.

Crucially, the weight of the single largest stock is now capped at 20% (down from 33%), and the combined weight of the top three stocks must not exceed 45% (down from 62%). The official implementation deadline for these Bank Nifty changes is March 31, 2026

This mandate forces a rebalancing of ETFs and passive funds, which is expected to reduce volatility driven by a few large-cap banks. Traders should anticipate short-term shifts as index fund portfolios adjust to the new SEBI norms.

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