The recent market capitalisation review of stocks by AMFI has yielded interesting results. Six mid cap names moved up into the large cap league while eight large cap names were reclassified as midcaps.
HDFC AMC whose IPO was listed in August was a new entrant in the large cap space. Vodafone Idea replaced Idea Cellular in large caps.
Following the correction in equity markets in the last six months, large cap companies such as Hindustan Aeronautics Ltd., Shriram Transport Finance Co. Ltd., Sun TV Network Ltd., Aditya Birla Capital Ltd., Bharat Heavy Electricals Ltd., TVS Motor Company Ltd. Bharat Electronics Ltd. and Bharat Forge Ltd. saw drop in their market capitalisation. Consequently, they were re-categorised as mid caps, as per SEBI definition.
The mid caps, which transitioned to the large cap, were Divi's Laboratories Ltd., Page Industries Ltd., Larsen & Toubro Infotech Ltd., Berger Paints India Ltd., Glaxosmithkline Consumer Healthcare Ltd. and Indiabulls Ventures Ltd.
Mutual funds will have to rebalance their portfolio based on the new categorisation.
In October 2017, SEBI recommended uniform definitions for large cap, mid cap and small cap companies to ensure a standardised investment universe across all fund houses.
As per SEBI definition, large cap companies as the first 100 companies in terms of full market capitalization, while companies with market capitalisation from 101 to -250 companies are categorised as mid caps. Small cap companies have market capitalisation beyond 250.
Accordingly, AMFI in consultation with SEBI and the exchanges (NSE and BSE) publishes a list of stocks on half-yearly basis. After the list isd, mutual funds have a month’s time to rebalance their portfolio.
Generally, there is a slight churn in portfolios after AMFI publishes a new list.