- Any index linked to mutual fund schemes with >₹20,000 cr AUM will be classified as “significant” and fall under SEBI’s new oversight.
- 47 indices—including Sensex, Nifty 50, Nifty Bank and sectoral benchmarks—are already flagged under the draft.
- Providers must register with SEBI within six months, adding a layer of transparency and a new grievance mechanism.
- Indexes already regulated by the RBI are exempt, creating a split regulatory landscape.
- Public comments are open until 10 Feb 2026, meaning the final rules could shift before implementation.
You’ve been betting on India’s big indices without realizing the regulator is about to change the rules.
SEBI’s latest consultation paper proposes a hard line: any index that serves as a benchmark for mutual‑fund schemes whose cumulative assets under management (AUM) exceed ₹20,000 crore will be labeled a “significant index.” Once tagged, the index must obey the Index Provider Regulations introduced in 2024, which impose stricter disclosure, governance and grievance‑redress standards.
Why SEBI’s New “Significant Index” Definition Changes the Game
The regulator’s motive is crystal clear—enhance transparency and protect investors from opaque index administration. By tying the definition to AUM, SEBI targets the most liquid, widely‑followed benchmarks that shape portfolio construction for a massive swath of Indian investors. The ripple effect is two‑fold: index providers face new compliance costs, and fund managers must reassess the benchmarks they use for performance attribution.
How the 20,000‑Cr AUM Threshold Impacts Major Benchmarks
Applying the proposed methodology to the first half of 2025, SEBI identified 47 “significant” indices across equity, debt and hybrid segments. The list includes the heavyweight BSE Sensex, NSE’s Nifty 50, Nifty Bank, Nifty 500, and BSE 500, as well as a suite of sector‑specific and duration‑based indices.
For fund houses, this means that any scheme tracking, say, the Nifty Bank, will now have to ensure the index provider is SEBI‑registered. Failure to do so could trigger compliance breaches, potential penalties, and reputational damage. Moreover, the new rule forces providers like BSE Index Services, NSE Indices and CRISIL to file registration applications within six months of the circular’s issuance.
Sector‑Wide Ripple Effects: From Nifty to Thematic Funds
The impact isn’t confined to large‑cap indices. The draft explicitly acknowledges thematic schemes—often built around niche baskets such as clean energy, fintech or ESG—that may not track “significant” indices. By differentiating these products, SEBI protects them from unnecessary regulatory drag while still tightening oversight on the truly market‑moving benchmarks.
Investors holding hybrid or debt funds linked to indices like Nifty Bond Index or BSE Money Market Index will see the same registration requirement. This uniform approach narrows regulatory arbitrage opportunities and levels the playing field across asset classes.
Historical Precedents: What Past Index Regulations Taught Us
India isn’t new to index governance. The 2020 introduction of the Index Provider Framework, primarily aimed at curbing conflicts of interest, led to higher disclosure standards and the emergence of a formal grievance mechanism. Post‑implementation, the market observed tighter spreads between index‑linked ETFs and their underlying benchmarks, signaling improved pricing efficiency.
Globally, the EU’s Benchmark Regulation (BMR) of 2018 provides a useful parallel. By mandating registration, transparency, and oversight for benchmarks exceeding €500 million in turnover, the BMR reduced instances of benchmark manipulation and heightened investor confidence. SEBI’s move mirrors that trajectory, scaling it to India’s unique market size and structure.
Technical Primer: Understanding Index Provider Regulations
Index Provider Regulations set out the licensing, disclosure and operational standards that entities must follow to publish an index. Key requirements include:
- Publicly available methodology documents.
- Periodic performance and composition reporting.
- Independent oversight committees to guard against conflicts.
- Defined grievance‑redress channels for investors using the index.
By bringing “significant” indices under this regime, SEBI ensures that the most influential benchmarks are managed with a higher degree of scrutiny.
Investor Playbook: Bull and Bear Cases
Bull Case: The added transparency may attract foreign inflows, as overseas investors often demand robust governance for benchmark products. Index‑linked ETFs could see tighter tracking error, improving returns for long‑term holders. Fund managers that proactively align with SEBI‑registered providers might enjoy a reputational edge, positioning their schemes as “regulation‑ready.”
Bear Case: Compliance costs could be passed onto investors through higher expense ratios, especially for niche or thematic funds that need to switch providers. A lag in registration might force some funds to temporarily shift to alternative benchmarks, creating short‑term performance volatility. Additionally, any misstep in the grievance process could expose providers to legal challenges, indirectly affecting fund valuations.
Smart investors should monitor the upcoming public comment period. If the final rules soften the AUM threshold or extend grace periods, the impact on existing portfolios could be muted. Conversely, a strict final rule would warrant a re‑evaluation of index‑linked exposure, particularly in high‑turnover equity schemes.