Amfi category: Adani Power, BoB, Cholamandalam may enter large cap space

HDFC AMC, Godrej Properties to migrate lower; move part of Amfi's half-yearly stock reclassification

Adani Power, Bank of Baroda (BOB) and Cholamandalam Investment & Finance are among the stocks seen migrating from mid-cap to large-cap universe during the half-yearly stock reclassification exercise undertaken by mutual fund industry body Amfi. Meanwhile, Torrent Pharmaceuticals, HDFC AMC and Godrej Properties are among the seven stocks that could migrate lower from large-caps to midcaps.

Newly-listed stocks such as Life Insurance Corporation (LIC) and Adani Wilmar, which have a market cap of over Rs 5.5 trillion and Rs 82,000 crore, respectively, are expected to get added to the large-cap universe directly.

New-entrants that could get added to the mid-cap universe include Delhivery, Vedant Fashions and Motherson Sumi Wiring (formed on account of a demerger).

Another eight stocks are seen upward migrating from small-caps to mid-caps. These include Tata Teleservices, KPR Mills and Tanla Platforms.

The review period for reclassification of stocks ends on June 30 and the changes are published by Amfi in the first week of July. Any sharp movement in stock prices, especially those at the borderline, over the next few weeks could see new names getting added to large or mid-cap lists.

Stocks ranked between 1 and 100 in terms of their full market capitalisation are classified as large-cap, those ranked between 101 and 250 are classified as mid cap, while stocks ranked beyond 251 are classified as small cap.

“The upward migrating stocks have outperformed the downward migrating stocks. There could be some more outperformance over the next few weeks and then reversion could set in,” said analyst Brian Freitas of Periscope Analytics, who publishes on Smartkarma.

The reclassification can lead to a churn in portfolios of actively-managed schemes. For instance, the large cap fund category, which has assets under management of nearly Rs 2.3 trillion, is required to have at least 80 per cent of their assets invested in large cap stocks.

As a result, the stocks that get upgraded to large-caps could see buying interest, while there could be some selling pressure on those that migrate downwards. To be sure, unlike index fund reclassifications, active funds have some flexibility if they wish to remain invested in stocks that move out of their investing universe.

Actively-managed mutual fund schemes are given one month to realign their portfolios based on the categorisation of the fund.

An analysis done by IIFL Alternative Research shows Adani Power is not yet owned by any scheme in the largecap or even large and midcap category. As a result, the stock could see some buying interest from large cap-oriented schemes. Meanwhile, largecap funds already have an exposure worth over Rs 1,000 crore in Cholamandalam Investment and over Rs 500 crore in BOB. Also, large-cap schemes have an exposure of over Rs 400 crore each to stocks that are expected to migrate lower to midcaps such as Torrent Pharma, Godrej Properties and Jubilant Foodworks.

Currently, midcaps schemes have considerable exposure to Gujarat State Petronet (Rs 971 crore), Sanofi India (Rs 444 crore) and Natco Pharma (Rs 355 crore), which are expected to migrate from midcap to small cap, as per IIFL.

Upgrade		Downgrade
Mid Cap to Large Cap		Large Cap to Mid Cap
Adani Power		Torrent Pharma
Cholamandalam Investment		HDFC AMC
Bank Of Baroda		Godrej Properties
Bandhan Bank		SAIL
L&T Tech		Jubilant Foodworks
LIC*		Cadila Health
Adani Wilmar*		PB Fintech

 

Small Cap to Mid Cap		Mid Cap to Small Cap
Tata Tele		Sanofi India
KPR Mill		Gillette India
Tanla Platforms		Ajanta Pharma
Poonawalla Fincorp		Alkyl Amines
Chambal Fertilisers		Happiest Minds
Phoenix Mills		Gujarat State Petronet
S K F India		G R Infraprojects
Sheela Foam		Indiamart Intermesh
Source: IIFL Alternative Research; Note: *New listings