PSU bank stocks surged on October 31 after SEBI announced changes to Bank Nifty rules, mandating a minimum of 14 constituents instead of the current 12. The weight of the top constituents will now be capped at 20%, down from 33%, while the combined weight of the top three will be reduced to 45% from 62%. The top three — HDFC Bank, ICICI Bank, and SBI — will see a gradual reduction in weight across four tranches.
New potential inclusions include Yes Bank, Indian Bank, Union Bank, and Bank of India, which drove gains in their shares. Union Bank led with a rise of nearly 6%, Yes Bank climbed over 3%, and Bank of India gained 2%. The PSU Bank index was trading 2% higher by midday, led by Union Bank, Canara Bank, UCO Bank, and Punjab National Bank, making it the top-performing sectoral index, while the Nifty Private Bank index fell 0.35%.
HDFC Bank and ICICI Bank, holding 28.49% and 24.38% weight in Bank Nifty, are expected to face outflows of $296.1 million and $199.5 million, respectively, in four tranches starting December 2025. SBI, Axis, and Kotak may also see minor outflows. The rebalancing, set to finish by March 31, 2026, aims to diversify the index and reduce concentration risks. Canara Bank hit a 15-year high at Rs 138, aided by a 19% profit rise and higher interest income.
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