Description

BSE Index Services announces revised methodology for fast-track inclusion of newly listed companies in BSE AllCap and related indices, changing eligibility from top 10 to top 200 companies and modifying the evaluation timeline.

Summary

BSE Index Services Private Ltd has announced a significant change in the methodology for fast-track inclusion of newly listed companies into BSE AllCap and related Size and Sector Indices. The revised criteria expand eligibility from requiring companies to be among the top 10 by market capitalization to the top 200, while also modifying the evaluation timeline and data collection process. These changes take effect from December 2, 2025.

Key Points

  • Fast-track inclusion criteria broadened from top 10 to top 200 companies based on average total market capitalization
  • Applies to companies listed via IPOs or spin-offs
  • New monthly evaluation cycle established with specific timelines
  • Companies must satisfy all eligibility criteria under “Eligibility Criteria and Index Construction”
  • Previous system provided 5 days’ notice; new system includes monthly evaluation windows
  • Changes apply to BSE AllCap and related Size Indices and Sector Indices

Regulatory Changes

Previous Methodology:

  • IPO must be among top 10 companies based on one-month average daily total market capitalization
  • Companies meeting criterion added to index with five days’ notice to clients
  • Based on one-month average daily total market cap

New Methodology:

  • Company must be ranked among top 200 companies based on average total market capitalization
  • Eligibility check for companies listed between Monday following 3rd Friday of T-2 month until 3rd Friday of T-1 month (where T is current month)
  • All data points considered for period of one month ending 3rd Friday of current month
  • Companies meeting all criteria added to index at market open on Tuesday following first Monday of each month
  • Structured monthly inclusion schedule replaces ad-hoc 5-day notice system

Compliance Requirements

  • Index fund managers and passive investment vehicles tracking BSE AllCap and related indices must prepare for potential monthly index rebalancing
  • Market participants should monitor newly listed companies in the top 200 by market capitalization for potential fast-track inclusions
  • Portfolio managers need to adjust rebalancing strategies to account for the new monthly inclusion schedule (Tuesday following first Monday of each month)
  • For queries regarding methodology changes, reach out to bseindex@bseindia.com

Important Dates

  • Announcement Date: October 29, 2025
  • Effective Date: December 2, 2025
  • Evaluation Window: Companies listed between Monday following 3rd Friday of T-2 month until 3rd Friday of T-1 month are checked for eligibility
  • Data Period: One month ending 3rd Friday of current month
  • Inclusion Date: Market open on Tuesday following first Monday of each month

Impact Assessment

Market Impact:

  • Significantly increases the pool of eligible companies for fast-track inclusion (from top 10 to top 200)
  • More newly listed companies will potentially enter major indices faster, affecting index composition
  • Enhanced representation of recent IPOs and spin-offs in BSE indices

Operational Impact:

  • Index funds and ETFs tracking BSE AllCap and related indices will experience more frequent rebalancing related to new listings
  • Passive investment strategies will need to accommodate broader fast-track inclusion criteria
  • Monthly inclusion schedule provides more predictability compared to previous 5-day notice system

Investor Impact:

  • Passive investors gain faster exposure to significantly sized new listings
  • Improved index responsiveness to market developments and new economy companies
  • More systematic and transparent inclusion process with defined monthly schedule

Liquidity Impact:

  • Newly listed companies meeting criteria may experience increased trading volumes upon index inclusion announcements
  • Broader eligibility may distribute index inclusion impact across more securities

Impact Justification

Methodology change affects index composition and broadens eligibility criteria for newly listed companies, impacting index funds and passive investors tracking BSE indices. The relaxation from top 10 to top 200 companies significantly increases potential inclusions.