Finnifty Rebalancing: HDFC Bank, ICICI Bank See Reduced Weight in Index

The Finnifty index, which tracks the top financial services companies in India, is undergoing a significant reshuffle. The rebalancing aims to reduce concentration in a few large banks and create a more diversified benchmark.

Historically, HDFC Bank and ICICI Bank dominated the index, but the upcoming changes will redistribute weight across private banks, PSU banks, insurers, and NBFCs. The goal is a balanced, more representative index of the sector.

Current vs Expected Weights in Finnifty

The reshuffle affects the weight allocations of major constituents. Here’s a snapshot of the current and expected weights:

• HDFC Bank: Current 31.7%, Expected 19%
• ICICI Bank: Current 20.5%, Expected 14%
• SBI: Current 8.4%, Expected 10%
• Axis Bank: Current 7.6%, Expected 8.4%
• Kotak Bank: Current 6.5%, Expected 7.3%
• Bajaj Finance: Current 5.6%, Expected 6.3%
• Bajaj Finserv: Current 2.5%, Expected 4.4%
• Shriram Finance: Current 2.5%, Expected 4.4%
• BSE: Current 2.4%, Expected 4.3%
• Jio Finance: Current 2.1%, Expected 3.7%
• SBI Life: Current 1.8%, Expected 3.3%
• HDFC Life: Current 1.7%, Expected 3%
• Cholamandalam Finance: Current 1.5%, Expected 2.7%
• PFC: Current 1.1%, Expected 1.9%
• ICICI General Insurance: Current 1%, Expected 1.8%
• REC Ltd: Current 0.9%, Expected 1.6%
• Muthoot Finance: Current 0.8%, Expected 1.5%
• SBI Card: Current 0.5%, Expected 1%
• ICICI Prudential Life: Current 0.5%, Expected 0.9%
• LIC Housing Finance: Current 0.3%, Expected 0.6%

This adjustment clearly reduces the dominance of the top two private banks and spreads influence more evenly across mid-sized banks, NBFCs, and insurers.

Key Highlights of the Finnifty Rebalancing

• Reduced Concentration: HDFC Bank and ICICI Bank will no longer dominate the index.
• Increased Weightage for PSU Banks: SBI and other public banks gain higher representation.
• Boost to NBFCs and Insurers: Mid-tier financial companies like Bajaj Finserv, Shriram Finance, and insurance firms get more prominence.
• Balanced Index Composition: Smaller banks and non-banking financial companies will now have a fairer share in the benchmark.

Why This Matters for the Market

The reshuffle reflects sector-wide diversification, moving Finnifty from a concentration-heavy index to a balanced financial services benchmark. Investors and fund managers can now track the performance of a broader array of financial companies.

• HDFC Bank and ICICI Bank will have reduced influence in the index, while PSU banks and NBFCs see an increase in their weightage.
• The index now mirrors the broader financial ecosystem, rather than just top private banks.
• This transition may change market dynamics in terms of passive inflows into Finnifty-based funds.

Summary

Finnifty’s rebalancing reduces the weight of HDFC Bank and ICICI Bank while boosting PSU banks, NBFCs, insurers, and smaller financial firms. The index is set to become more diversified and representative, reflecting the full spectrum of India’s financial services sector.

For investors tracking Finnifty, this shift highlights the changing structure of the index and ensures a more balanced benchmark for financial-sector investments.