Explainer: Why stock exchanges have to rejig their bank indices

The market regulator has directed exchanges to rebalance their non-benchmark indices — Bank Nifty , BSE Bankex and Fin Nifty — on which derivatives are traded. Ananya Grover explains how this will help reduce exposure to individual stocks through index derivatives

l What was Sebi’s initial proposal?

IN FEBRUARY, THE Securities & Exchange Board of India (Sebi) had proposed revising the eligibility criteria for non-benchmark indices. It noted that while benchmark indices are generally broad-based, sectoral or thematic indices tend to be more concentrated with the top few constituents significantly influencing the index. It proposed that non-benchmark indices should have a minimum of 14 constituents, the top constituent’s weight should be less than 20%, and the combined weight of the