The Association of Mutual Funds in India (Amfi) is set to release a new stock classification list. The list will take into account data from January to June 2022, when Dalal Street experienced record foreign portfolio investment (FPI) outflows and extreme volatility.
“Surprisingly, the type of stocks that will get upgraded (from small to mid-cap and from mid- to large-cap) does not indicate a risk-off environment, as most of them belong to cyclical and capital intensive sectors, such as financials and industrials,” ICICI Securities said in a report.
“On the other hand, many of the downgrades are in the growth, quality, and defensive categories,” the report added.
The mutual fund industry body publishes a list of stocks, dividing them into three categories of large-cap, mid-cap and small-cap, based on their average market capitalisation between January and June. Amfi does this twice a year.
Based on data available from January 22, 2022 to June 22, ICICI Securities has predicted the positions of the stock.
Here are the stocks that are most likely to move into or out of certain capital groups.
Stocks That Could Be Upgraded
Upgrades from mid-cap to large-cap and small-cap to mid-cap come primarily from the industrial, real estate, financial services, banks, and the auto sectors. Adani Power, Cholamandalam Investment, Hindustan Aeronautics, and Bank of Baroda are among the stocks expected to move from mid-cap to large-cap. Adani Power currently ranks 63 in terms of current market capitalisation, followed by Cholamandalam Investment (87), Bank of Baroda (90), and Hindustan Aeronautics (93).
Tata Teleservices (Maharashtra), KPR Mills, Tanla Platforms, Poonawala Fincorp, Phoenix Mills, SKF India, and Chambal Fertilisers are likely to make the transition from small-cap to mid-cap.
Stocks That Could Be Downgraded
Stocks, such as HDFC AMC, Godrej Properties, SAIL, Zydus Lifesciences, Jubilant Foods, and PB Fintech could be relegated from the large-cap to the mid-cap category, according to policybazar. Except for IDBI Bank, which has a low probability, the rest all have a high likelihood of being downgraded to the mid-cap category.
Sanofi India, Ajanta Pharma, Happiest Minds, UCO Bank, and Aditya AMC are a few notable companies that could be transitioning from mid-cap to small-cap. Sanofi India Healthcare, Ajanta Pharma Healthcare, and Aptus Value have a low probability of being downgraded to small-cap; the rest all have a high probability of being downgraded.
LIC, Adani Wilmar Gain Direct Entry Into Large-Cap
The new listings in the large-cap and mid-cap space are from a mix of insurance, staple, discretionary, auto, and the transport sectors. In all probability, Life Insurance Corporation of India (LIC) and Adani Wilmar could enter the large-cap space soon, while Delhivery, Vedant Fashions, and Motherson Wiring could get into the mid-cap category.