Following a restructuring initiative by the Association of Mutual Funds in India (AMFI), Jio Financial has entered the large-cap segment, while newcomers Tata Tech, JSW Infra, and IREDA have made their debut in the midcap category.
The large-cap threshold has been increased to Rs 67,000 crore from Rs 49,700 crore in June 2023, and the midcap cut-off has risen to Rs 22,000 crore from Rs 17,400 crore. Effective from February and valid until July this year, these changes will be in place until the next reshuffle by AMFI.
In the transition from mid-cap to large-cap status, Jio Financial is a notable addition. Other stocks promoted include Power Finance Corporation, IRFC, Macrotech Developers, Polycab India, REC, Shriram Finance, Union Bank, and IOB.
Stocks moving from small-cap to mid-cap include Mazagon Dock, Suzlon Energy, Lloyds Metals, SJVN, Kalyan Jewellers, KEI Industries, Credit Access Grameen, Exide Industries, Nippon Life, Ajanta Pharma, Narayana Hrudaya, and Glenmark Pharma.
Whereas, stocks moving from large-cap to mid-cap are Hero Motocorp Limited, Samvardhana Motherson International Limited, Tube Investments Of India Limited, Bosch Limited, Indian Railway Catering & Tourism Corporation Limited, PI Industries Limited, Adani Wilmar Limited, and UPL Limited.
The stocks transitioning from mid-cap to small-cap include Carborundum Universal Limited, Kajaria Ceramics Limited, Bata India Limited, Bharat Dynamics Limited, Aditya Birla Fashion And Retail Limited, Laurus Labs Limited, Sumitomo Chemical India Limited, Navin Fluorine International Limited, Atul Limited, Whirlpool Of India Ltd, Crompton Greaves Consumer Electricals Limited, Vinati Organics Limited, Aarti Industries Limited, Pfizer Limited, and Rajesh Exports Limited.
“The impact of AMFI’s stock categorisation can be observed in the shifts of fund flows based on the recent performance of stocks. Mutual funds and High Net-worth Individuals (HNIs) adjust their allocations in response to these changes. Stocks that are elevated to a higher category tend to attract more investment, leading to fund inflows, while stocks demoted to a lower category experience outflow,” said Atul Parakh, CEO of Bigul.
Parakh also added, this reclassification into large, mid, and small-cap categories is likely to introduce volatility in the market towards the end of this month, coinciding with the new classifications becoming effective in the first week of February 2024. Overall, this categorisation enhances the chances of wider choices for investments by large-cap, mid-cap, and small-cap funds.
While the AMFI stock categorization is a key reference for active equity mutual fund managers, its impact on inflows or outflows depends on various factors, including fundamental and non-quantitative considerations, as decided by active fund managers.