YES Bank, Union Bank shares may see $250 mn inflows on Nifty Bank inclusion; here's how

YES Bank and Union Bank of India are likely to attract a combined $250 million in inflows following their addition to the Nifty Bank index. The development comes after NSE finalised significant revisions to the index methodology. The banking gauge will now comprise a fixed 14 constituents, compared with the earlier cap of 12.

Under the revised framework, the 14 stocks will be selected based on their six-month average free-float market capitalisation. Eligible stocks must also be available for trading in the NSE F&O segment, as required by the updated criteria.

The new inclusions will be added in one go, while the weights of the top three constituents will be gradually reduced across subsequent reviews. As a result, both the newly added stocks and the existing members are likely to see slight weight changes in the all four tranches, Nuvama Institutional Equities said in a note.  As per the brokerage, the weightages of top 3 stocks are capped at 19 per cent, 14 per cent and 10 per cent, respectively, meaning they cant go beyond 43 per cent. All other index stocks must have weightages lower than the higher-weighted constituents in descending order hierarchy. 

The implementation of the same is likely in 4 monthly tranches: December 2025, January 2026, February 2026, and March 2026. Thus, the first tranche will be implemented effective from December 31, 2025, with the adjustment taking place on December 30, 2025.

Taking into account these tranches, Nuvama expects YES Bank to sees inflows of 55.2 crore shares worth $140 million, which would be equivalent to 6.1 times average daily volume. Union Bank is seen attracting $109 million in inflows. This would be at the expense of HDFC Bank and ICICI Bank, which are likely to see outflows to the tune of $322 million and $348 million, respectively. Two other private lenders namely Axis Bank and Kotak Mahindra Bank may also see $40-50 million outflows. State Bank of India, Bank of Baroda, Punjab National Bank, IndusInd Bank, Federal Bank, IDFC First Bank, Canara Bank and AU SFB, among others, are seen attracting up to $78 million in inflows.