A narrower pool of investment choices would reduce the opportunity to diversify, exposing Canadian investors to greater risk amid a highly volatile period for stock markets.

U.S. home improvement retailer Lowe's Cos Inc (>> Lowe's Companies, Inc.) agreed this month to buy Canada's Rona Inc (>> RONA Inc.) for C$3.2 billion, paying a premium of more than 100 percent after the Canadian dollar fell from parity when a much lower bid was rejected in 2012.

If the deal goes through it will eliminate a consumer discretionary name from a bank- and resource-dominated local stock market.

"This is one of the first companies that is now going to be taken over by U.S. companies because our dollar is so low," said Norman Levine, managing director, Portfolio Management Corporation.

"It's bad long term for the Canadian investor," he added.

Easy to understand, easy to value real estate investment trusts (REITs) could also be on the radar for large U.S. players, according to Lorne Steinberg, president of Lorne Steinberg Wealth Management.

"There are a number of big REITs that own good juicy portfolios of properties that throw off cash flows," said Steinberg. "There is also enough scale there that you could see potentially a large deal"

To be sure, new listings can add to the menu for investors. But initial public offerings have been lean at the start of 2016.

Moreover, portfolio managers worry that Canada's stock market is already too narrow. Together, the protected financial and telecom sectors make up 43 percent of the S&P/TSX Composite index, while out of favor energy and mining stocks account for another 28 percent.

Once dominant technology name BlackBerry Ltd (>> BlackBerry Ltd) has seen its market capitalization vastly reduced, while industrial sector icon Bombardier Inc (>> Bombardier, Inc.) has been reduced to a penny stock.

The index is "too cyclical" and needs to "broaden out," said Elvis Picardo, a strategist at Global Securities in Vancouver. "It tends to put investors at undue risk."

However, Picardo sees scope for a weaker currency to accelerate the transition by giving companies that earn revenue outside of Canada, such as CGI Group Inc (>> CGI Group Inc), greater "firepower."

He hopes for growing market capitalizations to allow sectors like technology and utilities to contribute more to the index going forward.

(Reporting by Fergal Smith; Editing by Chizu Nomiyama)

By Fergal Smith