The Nifty PSU Bank index surged to a record closing high of 8,184.35 points on Friday, after the Securities and Exchange Board of India (SEBI) issued a circular implementing revised eligibility criteria for derivatives trading on non-benchmark indices. Intraday, the index hit a fresh peak of 8,272.30 points.
According to the new SEBI guidelines, non-benchmark indices such as Nifty Bank, Bankex, and Fin Nifty must include at least 14 stocks to qualify for derivatives trading. Since Nifty Bank currently has 12 constituents, at least two additional banks are expected to join the index.
A report by Nuvama Institutional Equities identified Yes Bank and Indian Bank as leading candidates for inclusion if two new banks are added. In a scenario where four banks are included, Union Bank of India and Bank of India are also likely contenders.
On Friday, Yes Bank shares rose 2.4% to ₹22.77, while Union Bank gained 4.2% to ₹148.36, making it the second-biggest contributor to the Nifty PSU Bank rally. Bank of India and Indian Bank also advanced 0.8% and 0.5%, respectively.
Nuvama highlighted that Indian Bank could benefit from a “triple trigger”—potential Nifty Bank inclusion in December, MSCI inclusion in February, and possible increases in foreign investment limits for PSU banks. The brokerage estimates that MSCI inclusion could attract inflows of up to $200 million within a week.
SEBI’s new rules also cap the weight of the top constituent at 20%, down from 33%, and limit the combined weight of the top three stocks to 45%, compared to 62% currently. This change will affect HDFC Bank, ICICI Bank, and SBI, whose weights will be gradually reduced in four tranches by March 31, 2026.
Nuvama projects outflows of $70–81.5 million from HDFC Bank per tranche, $46.6–55.6 million from ICICI Bank, and $18.6–22.2 million from SBI, while Yes Bank could see inflows of $104.7 million and Indian Bank $72.3 million in the first phase of rebalancing.
In October, Nifty PSU Bank gained 8.7%, outperforming Nifty Bank’s 5.8% rise. Nuvama noted that SEBI’s move will make the banking indices more balanced and representative, reducing concentration risks and enhancing sectoral diversity across Bank Nifty, Fin Nifty, and Bankex.
