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Equity analysts expect a huge wave of buying in mid and small stocks if multi cap schemes decide to remain as multi caps and abide by Sebi's  new portfolio rules. Photo: Reuters
Equity analysts expect a huge wave of buying in mid and small stocks if multi cap schemes decide to remain as multi caps and abide by Sebi's new portfolio rules. Photo: Reuters

Emkay's list of top mid and small cap stocks for multi cap mutual fund managers

  • According to new Sebi rules, multi cap funds have to invest at least 25% each in large caps, mid caps and small cap stocks
  • Mutual funds have to comply with the new rules by January 31 next year
  • Mutual funds also have an option to merge the scheme or switch to other category

Sebi has created a lot of buzz among the investors and industry participants by announcing changes in the asset allocation of multi cap funds. From January end of the next year and onwards, fund managers of multi cap mutual funds will have to invest at least 25% of their portfolio each in large cap stocks, mid caps and small cap stocks. Most of the multi cap funds at present are large cap biased with around 70-80% of their portfolios in the bigger companies. Though mutual funds have an option to merge, or convert their multi cap fund to other category, market analysts expect a huge wave of buying in mid and small stocks if these schemes decide to remain as multi caps and abide by the new portfolio rules.

Emkay Global Financial Services estimate 280 bn worth of buying in small-caps and 135bn in mid-caps, set off by selling 411bn in large-cap stocks. The financial services further adds that the quantum of buying could be impacted, if the existing schemes choose to merge with other prevailing schemes or re-classify itself.

"If the largest multi cap scheme chooses to reclassify itself, the expected quantum of buying decreases by one-third – in turn incentivising others to realign the portfolio to the new norms," says Emkay Report.

Emkay has prepared a ready reckoner of mid cap and small cap stocks for portfolio managers. Here is their list of stocks:

Top mid cap recommendations include Varun Beverages, Ashok Leyland, Max Financial, Vinati Organics and Crompton Consumer.

Top recommendations in small caps include Equitas, Dixon, Radico Khaitan, Rallis, Kalpataru, KNR Constructions and JK Lakshmi.

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