Sensex Sheds 0.24%, Nifty50 Declines 0.26% After SEBI's New Rules For Nifty Bank Index

The Indian stock market benchmark bourses were trading in red on Friday, October 31, despite positive global cues like the US Federal Reserve slashing rate amid return of foreign institutional investors (FIIs).

As of 1:04 PM, BSE Sensex was 0.24% lower at 84,201.69 level, and Nifty50 declined 0.26% at 25,810.95, meanwhile Nifty Bank was 0.07% lower at 57,989.80.

The markets are also factoring in the Securities and Exchange Board of India (SEBI) circular on the implementation of eligibility criteria, especially impacting the Nifty Bank index.

The Nifty Bank index will now require minimum 14 constituents with the weight of the top constituents capped at 20% as against the current 33%. The Nifty Bank currently has 12 constituents.

"The combined weight of the top three constituents ≤ 45%5. All  other  constituents’  individual  weights  must  be  lower than  those  of  the  higher-weighted  constituents," according to the market regulators' circular.

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The top three constituents - HDFC Bank, ICICI Bank, and SBI - will see a gradual weight reduction across four tranches.

As of September 30, HDFC Bank had a 28.49% weightage on the Nifty Bank index, ICICI Bank had a 24.38% weightage, followed by SBI at 9.17%.

Additionally, Kotak Mahindra Bank's weighted average was 8.97% and Axis Bank at 8.78% completed the top five on the Nifty Bank.

Meanwhile, Yes Bank, Indian Bank, Union Bank and Bank of India are expected to be the new candidates for inclusion

These adjustments will be done in four tranches till March 31, 2026.

"The new constituents would be added in tranche 1. The top 3 constituents will have a target weight at the end of tranche4. In each adjustment, the weight of top 3 constituents would be checked and if the weights are beyond the prudential norms, the excess would be targeted  for  reduction  equally over the remaining tranches," it said.