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The first week of July will see biannual reclassification of large, mid, and small-cap stocks by the Association of Mutual Funds in India (AMFI). During this, the AMFI will consider the average market cap of the last six months (January-June 2021) from both the exchanges to reclassify stocks into large-cap (1-100 stocks by market cap), mid-cap (101-250 stocks by the market cap), small-cap (251 onwards by market cap).
Large & midcaps reclassification
As per a report released by Axis Securities, in the upcoming rebalance, a total of 22 stocks are likely to get upgraded (from small-cap to mid-cap and mid-cap to large-cap). Of this, seven mid-cap stocks are likely to be reclassified as large-caps in this review. These include Adani Gas, Apollo Hospitals, Cholamandalam Investment and Finance Company, NMDC, Honeywell Automation, Bank of Baroda, and Godrej Properties.
On the other hand, seven large-cap stocks are likely to be reclassified as mid-caps. These include – Abbott India, Hindustan Aeronautics (HAL), Alkem Laboratories, Hindustan Petroleum Corp (HPCL), PI Industries, Petronet LNG, and Indraprastha Gas.
“The market cap of all the Indian stocks is up by 22 percent since January 1, 2021. With this, the cut-off Mcap of the large-cap (100th company) has significantly increased to an all-time high at Rs 36,738 crore.” said the report.
The report further added that the market cap cut-off of mid-caps has also crossed Rs 10,000 crore and reached Rs 11,519 crore for the first time.
Mid and smallcap reclassification
Axis Securities believes that around 12 small-cap stocks are likely to be reclassified as mid-caps. These include Tata Elxsi, APL Apollo Tubes, Kajaria Ceramics, Apollo Tyres, Bank of Maharashtra, Indian Bank, Affle India, Linde India, Alkyl Amines, Vaibhav Global, Bludart, and Tanla Platforms. Three newly listed stocks IRFC, Macrotech Developers, and Indigo Paints are also expected to be reclassified as mid-caps.
Similarly, 15 stocks are likely to be downgraded to small-caps from mid-caps. These include Granules India, AstraZeneca Pharma, Central Bank of India, IIFL Wealth Management, Motilal Oswal Financial Services, and Metropolis Healthcare among others.
Sebi guidelines
As per the circular released by SEBI in October 2017, the domestic mutual fund schemes have to be strictly categorised into baskets with a well-defined classification of largecap, midcaps and smallcap stocks. It had also said that AMFI will biannually prepare and review the list of stocks according to the criteria specified under the circular.
AMFI will release the list of stocks that will be reclassified in July while the fresh list will be effective from August 2021 to January 2022.