Not an easy prescription

Sectoral caps in indices need careful examination

The Securities and Exchange Board of India (Sebi) has nudged the stock exchanges to bring out discussion papers on sectoral concentration in the Nifty50 and Sensex indices, which has rekindled an age-old debate — whether showcasing a successful sector aggressively in the benchmark index is right, or whether the index should have a more diverse base to reflect the economy. On its part, the market regulator seems worried about the rising concentration of the financial sector (banks and non-banking financial companies), at 37 per cent in the Nifty50 index and 40 per cent in the Sensex. While not strictly comparable,