Fifth time's the charm: Mutual fund largecap cutoff ready for a 17% stretch

The catch gets bigger - largecap and midcap thresholds to expand in January

A report by Nuvama Alternative and Quantitative Research suggests that the largecap cutoff may climb 17 per cent to Rs 99,200 crore, while the midcap threshold could rise to Rs 32,400 crore. This would mark the fifth consecutive increase for largecap stocks and the ninth for midcaps.

 

In January 2021, the cutoff for a stock to qualify as largecap was Rs 28,141 crore, while the midcap threshold stood at Rs 8,354 crore. The ongoing rise in market capitalisation (mcap) thresholds mirrors the sharp rally in domestic equities since the pandemic. 

 

 

The Association of Mutual Funds in India revises the list of largecap, midcap, and smallcap stocks every six months, with reviews taking place in June and December. The updated list is typically announced during the first week of the following month.

 

The top 100 companies by mcap qualify as largecaps, the next 150 as midcaps, while the remaining are classified as smallcaps.

 

The steep increase in mcap thresholds has sparked calls for a reassessment of stock classification methodology. Discussions have taken place regarding altering the reclassification process or expanding the number of largecap and midcap stocks. However, both the regulator and the industry have opted to maintain the current approach for now.

 

Stocks primed to move from midcap to largecap include CG Power, Rail Vikas Nigam, ICICI Prudential Life Insurance, and Indus Towers, among others. Four new listings — Hyundai Motor India, Bajaj Housing Finance, NTPC Green Energy, and Swiggy — could also join the largecap category.