NSE considers caps on Nifty's sector weights; move may hit financial stocks

Experts say most popular global indices don't have a sectoral cap, but the weight of the top sector in markets like the US, Japan and the UK is relatively less compared to India

The National Stock Exchange of India (NSE) is considering capping sectoral weights in the benchmark Nifty50 index, a move that could trigger a sell-off in financial stocks. The proposal is aimed at providing more diversity and reducing the concentration of one sector.

The Nifty, considered a barometer of the Indian economy, has the representation of 13 sectors through 50 stocks. However, financials, which include banks and non-banking financial companies (NBFCs), alone account for over 37 per cent of the index weight, exerting a disproportionately high influence on the market. In other words, the fortune of the stock market is tied