HO/47/15/11(1)2025-MRD-TPD1/ I/63/2025

5 · 7.1 In addition to the existing eligibility criteria for derivatives on indices, specified in Clause 1.1.2 of Chapter 5 of SEBI Master Circular for Stock Exchanges and Clearing Corporations dated December 30, 2024, Stock Exchanges shall follow the following prudential norms before introducing derivatives on non-benchmark indices:

5 · 7.1.1 Minimum of 14 constituents;

5 · 7.1.2 Top constituent's weight ≤ 20%

5 · 7.1.3 Combined weight of the top three constituents ≤ 45%

5 · 7.1.4 All other constituents' individual weights must be lower than those of the higher-weighted constituents (i.e. a descending weight structure).

4 · 1For compliance with the eligibility criteria prescribed at para 1 above, stock exchanges shall undertake necessary constituent / weight adjustments in existing NBIs.

4 · 2In order to achieve the objective mentioned at para 4.1 above,

4 · 2.1. the compliance with prudential norms may be implemented through constituent / weight adjustment in single tranche for the two indices BANKEX (derivatives traded on BSE) and FINNIFTY (derivatives traded on NSE)

4 · 2.2. the compliance with prudential norms in case of BANKNIFTY (derivatives traded on NSE) may be implemented in a phased manner, over four monthly tranches, as illustrated below, in order to ensure orderly rebalancing of AUM tracking the index:

4 · 2.2.1. The new constituents would be added in tranche 1. The top 3 constituents will have a target weight at the end of tranche 4. In each adjustment, the weight of top 3 constituents would be checked and if the weights are beyond the prudential norms, the excess would be targeted for reduction equally over the remaining tranches . This is illustrated with an example below.

4 · 2.2.2. Assume the present weight of a constituent at Rank 1 by weight is 28% and the target weight is 20% (i.e. weight adjustment is 8%).

4 · 2.2.3. In the first tranche, the weight would be adjusted by 2% (i.e. 8% divided in 4 tranches) to 26%. At the beginning of the next tranche, weights of all the constituents would be re-evaluated for confirmation with prudential norms. Let's assume that the weight of Rank 1 constituent by weight drifted to 25.5% because of inter tranche price movement of constituents. Now, the remaining weight i.e. 25.5-20 = 5.5% would be adjusted by 1.83% in the instant tranche (i.e. 5.5/3) and so on.

4 · 2.2.4. The iterative process for all tranches is summarized in the table below continuing the same example discussed above:

4 · 2.2.5. It may be noted that the example mentioned above is only for illustration purpose and do not represent actual numbers.

4 · 2.2.6. The excess weight after adjustment from the top constituents would be distributed amongst the other constituents as long as they meet the prudential norms mentioned

4 · 3 Accordingly, the effective date for implementation of eligibility criteria for Derivatives on NBI for existing NBIs as specified in SEBI circular dated May 29, 2025 at para 6 (sub para 7) as November 3, 2025 is now revised to as under:

4 · 3.1. upto March 31, 2026 for BANKNIFTY.

4 · 3.2. upto December 31, 2025 for BANKEX and FINNIFTY .

4 · 4Stock Exchanges shall ensure that the process of compliance with prudential norms for the aforementioned indices are implemented latest by the aforementioned timelines .