Surge in market valuations may give PNB, three other PSBs largecap status

Elevation expected during reclassification by Amfi next month

Public sector banks Punjab National Bank, Canara Bank and Union Bank of India are primed to enter the mutual fund industry's list of largecap companies after a strong run in their stock prices caused a spike in average market valuations in calendar year 2023.

Indian Overseas Bank and LIC-owned IDBI Bank could also make the cut when the Association of Mutual Funds in India (Amfi) releases the revised list early next month, according to an IIFL Securities report.

Two of the smallcap public sector banks (PSBs) —  Punjab & Sind Bank and Bank of Maharashtra —  are also likely to get upgraded to the midcap list.

Amfi releases a reclassified list of stocks every six months. Stocks that rank 1-100 in terms of average market capitalisation (m-cap) in the past six months are classified as large-cap; stocks ranked 101-250 as mid-cap; and stocks ranked 251 and below as small-cap. As a result, top mid-cap performers move to the large-cap list after every such exercise, pushing poor-performing large-cap stocks into the mid-cap basket.

PSB shares have seen some correction recently on account of profit booking. Despite that the PSB pack is the best-performing sectoral index as of now, going by the one-year returns (as on May 30). Their rally in PSB stocks happened on the back of bumper profits in succeeding quarters due to higher credit offtake and increase in margins.

The elevation of the PSBs along with Jindal Steel, TVS Motors, Tube Investments and Shriram Finance to the largecap space could push out the likes of PI Industries, Info Edge (India), Trent and Zomato to the midcap space, the report shows. Among the newly-listed companies, only Mankind Pharma is expected to enter the largecap universe. The rest (including those created out of demergers) will most likely find a place in the smallcap list.

Likely Changes

In

Jindal Steel & Power, Punjab National Bank, IDBI Bank, Canara Bank, T V S Motor, Tube Investments, Union Bank Of India, Indian Overseas Bank, Shriram Finance, Mankind Pharma
 

Out

P I Industries, Info Edge (India), Trent, Zomato, Macrotech Developers, Page Industries, Indus Towers, J S W Energy, Tata Elxsi, FSN E-Commerce Ventures