The Nifty PSU Bank index closed at its all-time high of 8184.35 points on Friday after the Securities & Exchange Board of India (Sebi) issued a circular to implement its eligibility criteria for derivatives trading in non-benchmark indices. Nuvama Institutional Equities listed three of its constituents as potential entrants to the Nifty Bank index.
Intraday, the index touched an all-time high of 8272.30 points.
As per the new criteria, the non-benchmark indices on which derivatives trade happen–Nifty Bank, Bankex, and Fin Nifty–will comprise at least 14 stocks. Nifty Bank has 12 constituents currently which means: at least 2 new banks are expected to join the index to meet this minimum requirement.
In its report, Nuvama said, top contenders in two scenarios. It said if there are two new additions, Yes Bank and Indian Bank can be the potential candidates and in case of four additions Union Bank and Bank of India are likely to be added.
On Friday, the share price of Yes Bank climbed 2.4% to Rs 22.77. While Union Bank share price rose 4.2% to Rs 148.36, contributing second-most to the rise in Nifty PSU Bank, Bank of India and Indian Bank stocks rose 0.8% and 0.5% respectively.
For Indian Bank, Nuvama sess a triple trigger play–Nifty Bank inclusion in December, MSCI inclusion in February, and reports of increased foreign investment limits in PSU banks. “Indian Bank also emerges as a strong contender for MSCI Feb 2026 inclusion, which could attract $200 million of inflows in a 7–8 days impact,” it said.
In addition, the regulator has also mandated that the weight of the top constituent will now be capped at 20% vs 33% for Nifty Bank currently and the combined weight of the top three constituents cannot exceed 45% vs 62% for Nifty Bank currently. The top three constituents (HDFC Bank, ICICI Bank, and SBI) will see a gradual weight reduction across four tranches, reaching their target weights by Tranche 4 (March 31, 2026).
In terms of flows, Nuvama sees outflows of $70 million-$81.5 million from HDFC Bank in each of the four tranches, $46.6 million- $55.6 million from ICICI Bank, and $18.6 million-$22.2 million from State Bank of India. Meanwhile, it sees inflow of $104.7 million in Yes Bank in the first tranche of rebalancing and $ 72.3 million in Indian Bank if only two stocks are added. HDFC Bank and ICICI Bank share prices closed around 1% lower on Friday.
Nifty PSU Bank has gained 8.7% in the month of October outperforming Nifty Bank’s 5.8% rise. Nuvama said, this is a step in the right direction, aiming to bring more balance and wider representation in these Indices BANKNIFTY, FINNIFTY, BANKEX. It added these measures are aimed at ensuring a more balanced and diversified index, reducing overdependence on a few large banks and making Nifty Bank more representative of the overall banking sector.