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Two of the five newly-listed companies this year are set to make their debut in large-cap section in the half-yearly reclassification of stocks by the Association of Mutual Funds in India (AMFI) based on market-cap.
Life Insurance Corporation and Adani Wilmar will make their entry as large-caps, while Delhivery, Vedanta Fashions and Motherson Wiring will be classified as mid-cap.
Reclassification based on size
The AMFI reclassification of stocks, based on size, will take into account average market capitalisation between January and June. The top-100 based on market-cap will be classified as large-cap, while companies ranked between 101 and 250 will become mid-cap and the rest will be part of small-cap stocks.
Based on the scheme classification, mutual funds have to make their investment choice for the next six months from the stock list to be announced by AMFI before mid-July.
With a market-cap of ₹4.19 lakh crore, LIC has a high probability of entering the large-cap sector despite closing at ₹663 on Tuesday much below the issue price of ₹949. On the other hand, Adani Wilmar has delivered a bumper return to investors by closing at ₹593 against the issue price of ₹230.
The ‘bear’ effect
Given the sustained bearish trend in the market, the upper-limit for small-cap stocks has fallen below the $2-billion mark to $1.9 billion, while that of mid-cap stocks will start from $5.4-billion mark, according to a ICICI Securities report.
Surprisingly, the type of stocks that will get upgraded (from small- to mid-cap and mid- to large-cap) do not indicate a risk-off environment as most of them are cyclical and capital-intensive sectors such as financials and industrials, said the research firm.
Incidentally, Nifty Mid-cap 100 and Nifty Small-cap 250 indices have fallen 14 per cent and 15 per cent since the start of this year.
Downgrade in cap category
Among stocks that will see a downgrade from large- to mid-cap include HDFC Asset Management Co, Godrej Properties, SAIL, Zydus Lifescience, Jubilant Foods and PB Fintech (PolicyBazaar). A host of 12 companies that will be downgraded from mid- to small-cap include Aditya Birla AMC, Nuvoco Vistas, Uco Bank, Natco Pharma and GR Infraprojects.
Among the stocks that will see an upgrade from mid- to large-cap include Adani Power, Hindustan Aeronautics, Cholamandalam Investment, Bank of Baroda and Bandhan Bank. Seven stocks including Tata Tele, KPR Mills and Tanla Platforms will get an upgrade from small- to mid-cap.
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