SEBI asks NSE, BSE to limit sectoral weightage
Market regulator Securities and Exchange Board of India (SEBI) has requested stock exchanges to consider placing a limit on sectoral weightage in benchmark indices, according to a Business Standard report.
SEBI is concerned about the financial sector’s increasing weight in benchmark indices since financial stocks dropped post the loan default by Infrastructure Leasing & Financial Services (IL&FS).
As per the report, the financial sector currently has a 37 percent weightage in the Nifty and over 30 percent weightage in the Sensex.
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“As a regulator, it (SEBI) wants to ensure the market doesn’t become too vulnerable to the performance of one particular sector,” the article qouted a a source as saying.
Moneycontrol could not independently verified the story.
The National Stock Exchange (NSE) and BSE had last week floated consultation papers for feedback on whether sectoral weightage should be capped as low as 25 percent.They have set May 31 and May 17, respectively, as deadline for the feedback.
The two exchanges will provide combined feedback to the market regulator, the report said.
Currently, a single stock’s weight has been restricted at 35 percent in a sectoral index and 25 percent in broader indices.
The top three stocks in an index cannot have a weightage of over 65 percent.
Index provider Asia Index, a joint venture between the S&P Dow Jones and BSE, has written to SEBI expressing its views, the report said.
Asia Index said that such a move would alter the index’s liquidity profile and have implications for the wider economy.
