New Delhi, Aug. 18 -- India's market regulator has proposed stricter norms for sectoral and thematic indices used in derivatives trade, mandating each index to be broad-based to ensure that no single stock dominates it. This would eliminate concentration risks, making equity derivatives safer for investors.

On 29 May, the Securities and Exchange Board of India (Sebi) unveiled norms that stated that each index must have at least 14 stocks to make it broad-based and that no single stock could be more than 20% of the index. Additionally, the weight of the top three stocks on the index was capped at 45%, with the remaining constituents following a descending weight order.

According to a consultation paper issued on Monday on implementation ...