Metal, PSU stocks top upgrades in Amfi m-cap review2 min read . Updated: 07 Jul 2021, 12:06 AM IST
- Three out of seven stocks upgraded to large from mid-caps belong to the public and metal sectors
Metal and government-owned stocks have dominated upgrades by Association of Mutual Fund in India (Amfi) semi annual review of stocks based on market capitalisation. The list of stocks that are reclassified will be effective from August to January 2022.
Three out of seven stocks upgraded to large from midcaps belong to PSU and metal sectors while four newly listed stocks have been included into midcap category.
“The cut off for the large cap is at ₹37700 crore whereas the midcap cut off came at ₹11800 crore in the AMFI reclassification of stocks review. Top 100 large cap stocks attribute 71.44%, while midcap stocks (101-250) attribute 16.27% and small cap stocks (251 below) attribute 12.29% of the total market cap," said Abhilash Pagaria, analyst, Edelweiss Securities Ltd.
With full market cap, the large cap classification has highest exposure to Banking, financial services and insurance (BFSI) (26.9%), IT (16.7%), consumer (14.9%), and oil & gas (12.2%) sector, he said.
The seven stocks that are reclassified to large from midcaps from PSU and metal sectors are NMDC,Steel Authority of India, Bank of Baroda. Other stocks which are upgraded are Adani Total Gas, Apollo Hospitals Enterprises, Cholamandalam Investment and Finance Company and Honeywell Automation India.
Stocks such as NMDC gained 61%, SAIL surged 76% and Bank of Baroda increased 40% while Adani Total Gas jumped 171%, Apollo Hospitals gained 50%, Cholamandalam Investment 32% and Honeywell Automation India 13% in the first six months of 2021.
The benchmark index Nifty jumped over 12% in January to June this year compared to a robust 29% surge of Nifty PSE which consist of government-owned stocks.
According to analysts at Edelweiss Securities, PSU stocks are anticipated to see a change in fortunes as environment turns reflationary– a necessity due to cyclical bias & high cost structure, large operating & financial leverage potential given peaking capex & debt. Besides, record-low valuations (60% discount to Nifty) and 5% dividend yield offer a favourable case for PSU stocks, the brokerage firm said.
Also, out of the four newly listed stocks which are classified into midcaps, Indian Railway Finance Corporation (IRFC) is state owned. Among other fresh listings Macrotech Developers, SonaBLW and Indigo Paints have debuted under mid cap category.
Among 11 stocks which are upgraded to midcap from smallcap segments two of them (Bank of Maharashtra and Indian Bank) are PSUs.
Conversely, HPCL, Hindustan Aeronautics are two stocks out of seven stocks which are reclassified to midcap from large caps.
Earlier in 2017, market regulator Securities and Exchange Board of India (Sebi) had defined large, mid and smallcap companies to ensure uniformity in the investment universe for equity mutual fund schemes. It had also said that AMFI will semi-annually prepare and review the list of stocks according to the criteria specified under the circular.
According to Sebi’s definition, with a six-month average market capitalisation, first 100 stocks are categorised as large cap, next 250 as midcap and rest as smallcap.
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