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The Securities and Exchange Board of India (SEBI) has issued a consultation paper introducing a proposed category for index providers called Significant Indices. These refer to stock market indices that are tracked by domestic mutual funds with a combined assets under management (AUM) exceeding ₹20,000 crore.

While SEBI has not formally defined the term, a Significant Index can be understood as an index that is extensively followed and has substantial investor money linked to it, making it crucial to the overall functioning of the market.

Given the large number of investors relying on such indices, regulators aim to subject them to enhanced supervision and stricter governance norms to ensure transparency, accuracy, and fairness.

As outlined by the regulator, the AUM calculation for identifying Significant Indices will follow a defined methodology:

• SEBI will consider the daily average AUM of domestic mutual fund schemes, calculated on a monthly basis over the preceding six months, ending on June 30 and December 31 each year.

• In cases where a mutual fund scheme tracks multiple indices or benchmarks, index providers will compute the AUM for each index by considering only the portion of the scheme’s assets that is attributable to that specific index or benchmark.

• In case of index of indices, the cumulative AUM tracking such underlying indices would also include the AUM tracking such indices in proportion to the respective weights.

• SEBI noted that similar regulatory frameworks already exist in markets such as Singapore and Australia.

• Additionally, the regulator has shared a provisional list of indices classified as significant, based on their aggregate AUM between January 1 and June 30.

SEBI’s proposal aims to bring greater oversight and transparency to widely tracked indices, ensuring stronger governance and reliability for indices that carry significant investor money and play a critical role in the market.

Source: SEBI