Mid-caps Varun Beverages and Tata Elxsi may be promoted to large-cap segment by mutual fund body: Nuvama

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Varun Beverages, Page Industries, ABB India and Tata Elxsi could move up from the mid-cap to the large-cap category in the next re-categorisation of Association of Mutual Funds of India (AMFI), according to Nuvama Alternative and Quantitative Research.

Recently listed stocks Tracxn Technologies, Dreamfolks Services, Electronics Mart, Harsha Engineers, Syrma SGS Technology and Tamilnad Mercantile Bank are likely to enter the small-cap category.

Periodically, AMFI publishes a list that puts stocks in three categories--large cap (1st to 100th companies based on their six-month average market cap), mid cap (101st to 250th companies) and small cap (251th onwards). This classification is important for the mutual fund industry because mutual funds are required to allocate certain percentage of money into these categories of stocks. For example, a large cap scheme should invest at least 35 per cent of its assets in large cap companies. The AMFI Stock Categorisation list, which was first released in 2020, helps investors compare the performance of various schemes against the standard.

In January 2023, AMFI will be releasing its new list, which will be valid from February 2023 to July 2023.

According to Nuvama’s analysts, an upward recategorisation does not necessarily mean added fund flows but it may lift the stocks.

Companies likely to move up from smallcap to midcap are consumption-driven names, Metro Brands, Blue Dart and Fine Organic Industries. Fine Organic is a manufacturer of speciality additives that can be used in foods, cosmetics and pharma among other things. The fourth name is Timken India which mainly makes bearings and power transmission products.

Downward revisions

Nuvama has also listed companies that could be downgraded to lower categories.

Stocks that could be moved from large-caps to mid-caps include two names from the financial world—Muthoot Finance and Bandhan Bank—and a pharmaceutical company, Gland Pharma. This list also includes Piramal Enterprises and MPhasis.

Among those who could drop from midcap to small-cap is a monopoly in the power business, Indian Energy Exchange. The list also includes cloud-infra builder Tanla Platforms, agrochemicals maker Chambal Fertiliser, and two public sector enterprises National Aluminium and NALCO, and New India Assurance.

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