Description

BSE announces methodology changes to BSE 500 and BSE 500 Shariah indices with new constituent selection criteria and revised compliance thresholds.

Summary

BSE Index Services announces methodology changes to BSE 500 and BSE 500 Shariah indices. The BSE 500 will transition from BSE AllCap to BSE 1000 as base universe and implement new ranking-based selection criteria. BSE 500 Shariah reduces non-permissible revenue threshold from 4% to 3%.

Key Points

  • BSE 500 changes base universe from BSE AllCap Index to BSE 1000 Index
  • New dual ranking system: top 750 by traded value AND top 750 by market cap
  • BSE 500 Shariah tightens non-permissible revenue limit from 4% to 3%
  • Both indices maintain existing trading frequency requirements (80% of trading days)

Regulatory Changes

BSE 500 Index:

  • Eligible universe changed from BSE AllCap constituents to BSE 1000 constituents
  • New constituent selection requiring dual top 750 rankings by annualized traded value and 6-month average free float market cap
  • Flexible adjustment mechanism if target 500 count not met

BSE 500 Shariah Index:

  • Non-permissible revenue threshold reduced from <4% to <3% of total revenue
  • Debt/Total Asset ratio remains unchanged at <25%

Compliance Requirements

  • Index tracking funds and ETFs must adjust portfolios according to new methodology
  • Portfolio managers tracking these indices should prepare for constituent changes
  • Market participants should review exposure to affected securities

Important Dates

  • BSE 500 changes effective: December 22, 2025
  • BSE 500 Shariah changes effective: September 22, 2025

Impact Assessment

Market Impact:

  • Potential changes in BSE 500 constituents due to new selection criteria
  • Index tracking funds may experience portfolio turnover
  • BSE 500 Shariah may see constituent exits due to stricter revenue limits

Operational Impact:

  • Fund managers need system updates for new methodology
  • Rebalancing activities will occur on effective dates
  • Possible volatility in affected securities around implementation

Impact Justification

Methodology changes to major indices affect index constituents and tracking funds but are routine operational updates