Why your Nifty Bank ETF could soon look different

Summary: If you look at any capitalisation-weighted index, one problem stands out: a handful of stocks dominate. To even out the derivatives market, SEBI aims to curb this over-concentration in sectoral and thematic indices. Find out how this move will impact your passive fund investments. Take a look at Nifty Bank and you’ll notice something obvious: a few big banks dominate the index. The same is true for Nifty Financial Services. This concentration has long been a problem, and SEBI has finally decided to act. In a new consultation paper, SEBI has proposed rules to ensure that non-benchmark indices (mainly sectoral and thematic) with derivatives don’t get skewed towards a handful of stocks. The new ground rules Here’s what SEBI wants for such indices: At least 14 stocks in the basket. The biggest stock can’t have more than 20 per cent weight. The top three stocks together can’t cross 45 per cent