Large-cap concentration much higher in India than US, shows data

The top 100 stocks in India account for 77.3 per cent of the Nifty 500 index. In US, the top 100 stocks account for 71.2 per cent of market capitalisation of the S&P 500 index

The concentration of large-cap stocks is starker in India than in the US. The top 100 stocks account for 71.2 per cent of market capitalisation of the S&P 500 index, a gauge to track the performance of 500 most-valuable US companies. 

The top 100 stocks in India account for 77.3 per cent of the Nifty 500 index. The next 150 stocks — categorised as mid-caps in India —account for 18.2 per cent in the S&P 500 and 16.1 per cent in the NSE 500, respectively. The rest 250 stocks — dubbed small-caps — account for 11 per cent in the US and just 6.6 per cent in India. 

This assumes significance following the Sebi diktat on multi-cap schemes, asking mutual funds to invest at least 25 per cent each in large-, mid-, and small-caps. Industry players say given the shallow depth of the mid- and small-cap universe, deploying large sums in these stocks poses challenges. The MF industry is instead suggesting the weighting be aligned to the market structure. 

“The multi-cap fund shall have an equal or higher weighting in mid- and small-caps than the weighting of these two buckets in the underlying benchmarks like BSE 500 and NSE 500. This will be the true reflection of the underlying benchmark. The underlying weighting will evolve in line with the market structure and fund allocation to each market cap bucket will reflect the same,” Amfi wrote to Sebi last week.