AMFI is expected to release the fresh list of categorisation by January 5 next year. Fund houses rejig their portfolios if necessary based on such reclassifications.
In the upcoming reclassification of stocks based on the market capitalization by the Association of Mutual Funds in India (AMFI), Yes Bank, Adani Enterprises, PI Industries, and Hind Aeronautics could enter the large cap club. Brokerage and research firm ICICI Securities has forecasted what stocks could be upgraded to large caps and midcaps in the upcoming shuffle while also guessing which ones could be forced to take a step down. AMFI is expected to release the fresh list of categorisation by January 5 next year. Fund houses rejig their portfolios if necessary based on such reclassifications.
ICICI Securities sees Yes Bank, Adani Enterprises, PI Industries, and Hind Aeronautics as ‘high probability’ stocks that may be upgraded from midcaps to large caps. The average market capitalization of all these four companies has been above Rs 29,000 crore which is well above the Rs 27,600 crore lower-end of the size limit for companies to be categorised as large caps. The report also estimates Jubilant FoodWorks to be reclassified as large cap but has termed it a ‘low priority’ even though its average market capitalization is above the mandatory limit.
Smallcap firms such as Laurus Labs, Indiamart Intermesh, Dixon Technologies, Alok Industries, Astrazeneca Pharma, Suven Pharmaceuticals, and Granules India are among the 11 stocks that ICICI Securities expects to be reclassified as midcaps. Of these Granules, and Multi Commodity Exchange are ‘low priority’ while other nine have been termed as ‘high probability’. The lower end of the size limit for stocks to be classified as midcaps is Rs 8,200 crore.
While there are likely to be upgrades from smallcaps to midcaps and midcaps to large caps, the brokerage firm also expects some stocks to be downgraded. Among large caps stocks, MRF, NMDC, United Breweries, Container Corporation, General Insurance, and Bank of Baroda could be reclassified as midcap stocks after the upcoming shuffle. All of these have an average market capitalization of less than the required limit and less than 100 rank based on m-cap. Of these stocks, MRF and NMDC are low probability.
Based on the classification of stocks, mutual funds get one month to align their portfolios according to the fresh shuffling dones by AMFI. The latest SEBI circular on multicap funds, that requires such funds to hold at least 25% of midcaps, largecaps, and smallcaps, would also facilitate heightened activity among funds that wish to retain their classification.