Yes Bank and Union Bank of India are set to enter NSE’s Nifty Bank as a part of the changes required by the capital markets regulator to its composition methodology. With their inclusion, the banking index will expand from 12 to 14 stocks, effective from December 31.
These additions are part of the Sebi’s directive that non-benchmark indices—such as BSE’s Bankex and NSE’s Bank Nifty and Finnifty—must contain at least 14 stocks to remain eligible for derivatives trading.
SEBI has also proposed capping individual stock weights and limiting the combined weight of the top three components to prevent any single stock or group of stocks from exerting excessive influence on the index.
Two new stocks are expected to collectively attract about $249 million in inflows, while HDFC Bank and ICICI Bank may witness outflows.
The NSE has placed a 43% cap on the combined weight of the top three Bank Nifty constituents — HDFC Bank, ICICI Bank, and SBI — compared with their current combined weight of 60%. This adjustment will be carried out in four monthly phases from December to March, prompting passive funds like index funds and ETFs tracking the Bank Nifty to rebalance their portfolios, resulting in outflows from some stocks.
According to Nuvama Alternative & Quantitative Research, the rebalancing could lead to $670 million in outflows from HDFC Bank and ICICI Bank by March, while SBI may see inflows of $31 million. The two new additions — Yes Bank and Union Bank — are projected to receive a total of $249 million in inflows.
The move to reduce stock specific influence in Bank Nifty likely follows the recent incident involving US trading firm Jane Street, which was accused of influencing Bank Nifty derivatives and component stocks to sway the index in its favour, according to the report.
At present, HDFC Bank holds a 27.5% weight, which Nuvama estimates will fall to 18.9% by March. ICICI Bank’s weight is expected to drop from 23.1% to 14%, while SBI’s weight will rise from 9.4% to 10%, reaching its highest-ever level.
Yes Bank, Union Bank of India share price
Yes Bank share price fell over 1.45% to ₹22.38 apiece on Wednesday, December 3. The banking stock has been under pressure lately as it has declined nearly 3% in last five session and 2.74% in a month.
Meanwhile, Union Bank of India share price plunged 2.02% to ₹152.62 on Wednesday. The stock has gained nearly 1.15% in a month and less than a per cent in six months.
Disclaimer: This story is for educational purposes only. Please consult with an investment advisor before making any investment decisions.
