Skip to content
Free updates Login
BankingNABARD / RBI

SEBI Norms for Sectoral and Thematic Derivative Indices

19 August 20251 min read
BANKING & FINANCESEBI Norms forSectoral andThematicDerivative Indices19 August 2025safalsetu.com

Why in the news

SEBI wants derivative-linked sector and theme indices to be broad-based, so a few heavyweights cannot dominate and create concentration risk.

Key facts

  • Minimum constituents: 14 stocks.
  • Single-stock cap: 20%; top-3 cap: 45% combined.
  • Others in descending weight order.

Derivative types

  • Forwards: customised OTC contracts for a future date at a pre-agreed price.
  • Futures: standardised exchange-traded contracts (NSE, BSE, MCX).
  • Options: right without obligation; call = buy, put = sell.
  • Swaps: exchange of cash flows, e.g. interest rate or currency swaps.

Sectoral versus thematic

  • Sectoral: one sector, e.g. banking, IT, FMCG, pharma, metals, energy.
  • Thematic: several sectors grouped by a theme, e.g. infrastructure, ESG, consumption, services.

Why they matter

They underpin F&O contracts, letting investors hedge, speculate or take sector exposure without picking single stocks.

Exam angle

  • Numbers: 14 stocks, 20% and 45% caps.
  • Forwards are OTC; futures are exchange-traded.

Test yourself

1. SEBI proposed a minimum of how many stocks in a sectoral or thematic index used in derivatives?

The paper proposes at least 14 constituents.

2. Under SEBI's proposal, the combined weight of the top three stocks in such an index is capped at what?

Top three stocks are capped at 45% combined.

3. Which derivative gives the buyer the right but not the obligation to buy or sell?

Options carry a right without obligation; a call is right to buy.

This topic is part of Daily Current Affairs 19 August 2025 (13 topics).

All topics of the dayDay quizAugust 2025

Read more