Zydus Lifesciences, Hero Motocorp, NHPC, Bosch in line for largecap upgrade

Zydus Lifesciences, Hero Motocorp, NHPC, Bosch and JSW Energy may move to mutual fund’s largecap basket thanks to a sharp run up in their stock prices in the past three months and a correction in some of the existing largecap stocks.

Nuvama Alternative & Quantitative Research early estimates for mutual fund July classification expects Marico, Berger Paints, SBI Cards, SRF and Polycab to move to from largecap to midcap list, making way for the new entrants.

The Association of Mutual Funds in India (Amfi) announced a revised list of largecap, midcap and smallcap stocks biannually (January and July). The list is revised based on the past six month’s performance. The top 100 stocks by market capitalisation (mcap) are labelled as largecap, and the next 150 fall into the midcap bucket. The rest of the listed stocks go to the smallcap bucket.

However, the rules may change before the next such exercise as the Securities and Exchange Board of India (Sebi) is mulling expansion of the largecap basket by 25 stocks. The review comes amid a sharp surge in the market-cap of smallcap companies, providing room for expansion of largecap and midcap segments.

In the present classification, companies with a market cap of less than Rs 22,000 crore qualify as smallcaps. This figure stood at just Rs 8,500 crore in December 2017. Similarly, the upper threshold for the midcap basket has gone up from Rs 29,000 crore to Rs 67,000 crore. Nuvama expects the largecap and midcap thresholds to rise further if the markets extend gains seen during the first three months of calendar 2024.

According to the Nuvama report, as per present rules, the stocks primed for smallcap to midcap upgrade include MRPL, HUDCO, IRB Infra, Global Health, BSE, NLC India, Bharat Dynamics, TICL, among others. They may replace stocks like Zee Entertainment, IIFL Finance, Devyani International, Piramal Enterprises and Ramco Cement.