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Thanks to the unprecedented bull run in the small- and mid-cap stocks, some of the leading companies, such as Proctor and Gamble, Akzo Nobel India and AstraZeneca Pharma India, which are currently ruling at ₹5,650, ₹2,325 and ₹3,627, have been categorised as small-cap stocks from being mid-cap by AMFI.
Similarly, stocks such as Metropolis Healthcare (₹2,954), Godrej Agrovet (₹665), Motilal Oswal Financial Services (₹875), Bombay Burmah Trading Corp (₹1,308) and Granules India (₹366) have now been classified as small-cap. stocks.
As per SEBI norms, the Association of Mutual Funds in India classifies stocks into large, mid and small-cap stocks based on market capitalisation every six months. Mutual fund schemes have to invest in these stocks based on their scheme profile. The top 100 companies by market-cap will be classified as large-cap while the next 150 will come under mid-cap and the rest as small-cap. Fund houses that had an investment in these stocks through their mid-cap focused funds have to reduce their exposure to meet the regulatory norms.
15 slips to small-cap
As per the latest reclassification list released on Tuesday, 15 mid-cap stocks have been downgraded as small-cap stocks while 11 stocks, including Tata Elxsi, Blue Dart Express, APL Apollo Tubes have got upgraded to mid-cap from small-cap.
With sustained foreign investment in the last few months, most large-cap stocks have become overpriced, forcing many investors to explore opportunities in small and mid-cap stocks.
The NSE mid-cap and small-cap indices have generated returns of 102 per cent and 67 per cent in the last 13 and 8 months, respectively.
The Nifty Smallcap index has been trading at a premium to Nifty for the first time since December 2014. It is trading at a premium of 7 per cent against an average discount of 21 per cent on a 12-month forward basis.
Adani Total Gas, NMDC, SAIL are among seven companies which have been upgraded from mid- to large-cap stock.
Large-cap to Mid-cap
Similarly, HPCL, Alkem Labs, Abbot India and Hindustan Aeronautics were among seven companies which have been downgraded from large to mid-cap category.
Recently listed Indian Railway Finance, Indigo Paints, Microterch Developers and Sona BLW Precision Forgings made their entry into mid-cap category.
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