Mutual funds’ largecap investment universe is expected to see seven changes in the upcoming stock reclassification exercise by the Association of Mutual Funds in India (Amfi).
According to a report by IIFL Securities, Hero MotoCorp, Zydus Lifesciences, JSW Energy, NHPC, Bharat Heavy Electricals, Bosch and Samvardhana Motherson are expected to earn upgrades in the revised list of largecap, midcap and smallcap stocks set to be released in the first week of July.
Amfi revises the list at the start of January and July every year based on the previous six-month performance of the stock.
The top 100 companies based on the average market-capitalisation (m-cap) in the past six months qualify as largecaps, the next 150 become midcaps and the rest smallcaps.
The seven stocks that are likely to earn an upgrade have gone up over 40 per cent since January 1, 2024, taking the market-capitalisation (m-cap) of all of them, except Bosch, past Rs 1 trillion.
In the July-December 2023 period, their average m-cap was around Rs 60,000 crore, shows Amfi data.
Their entry into the top 100 firms will lead to seven existing largecap stocks moving to the midcap basket.
They are expected to be ICICI Prudential Life Insurance, ICICI Lombard General Insurance, Polycab India, SRF, Marico, SBI Cards and Berger Paints India, according to the IIFL report.
Two of the new listings Bharti Hexacom and Go Digit General Insurance will also enter the midcap list.
The classification of stocks in largecap, midcap and smallcap baskets helps fund managers to stay true to the label.
Equity mutual fund categories have set guidelines on how much they can invest in largecap, midcap and smallcap stocks.
Smallcap stocks that are likely to move to midcap basket include Hudco, IRB Infra, Mangalore Refinery, Bharat Dynamics, Global Health, BSE, NLC India, Hitachi Energy, Tata Investment, National Aluminium Company, Hindustan Copper, Cochin Shipyard, ITI, Motilal Oswal Financial Services and Godrej Industries.
