India’s banking benchmark, Nifty Bank, is set for a significant change. Yes Bank and Union Bank of India will be added to the index from December 31, 2025, expanding the number of constituent banks from 12 to 14.
This move comes after SEBI’s new rules requiring indices eligible for derivatives trading to have at least 14 stocks. By widening the index, Nifty Bank aims to reduce its reliance on a handful of big banks and provide a fairer reflection of the sector.
Currently, the top three banks dominate the index, holding around 60% of its weight. After the reshuffle, this will drop to 43%, with the three largest banks capped individually at 19%, 14%, and 10%. The transition will be gradual, with allocations adjusted in four monthly tranches from December 2025 to March 2026, giving investors and fund managers time to rebalance.
For investors, this is likely to mean some shifts in portfolio allocations. Passive funds and ETFs that track Nifty Bank will now invest in Yes Bank and Union Bank, while the heaviest banks in the index may see minor outflows. Analysts estimate the two new entrants could attract about US $249 million in inflows.
The expansion is a step toward making the index more diverse and representative, reducing concentration risk and reflecting the wider banking landscape in India. Investors tracking the index or holding related ETFs can expect a smoother, phased transition, allowing adjustments without sudden market pressure.
Overall, the change is designed to balance the index, giving emerging banks a chance to feature alongside established players, and offering a more rounded view of India’s banking sector.
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