Adani Total, Apollo Hospitals, Chola could move to MF large-cap universe

The changes are likely during the half-yearly review undertaken by MF industry body Amfi during July first week

Adani Total Gas, Apollo Hospitals, Cholamandalam Investment are among the stocks that are likely to get added to the mutual fund (MF) large-cap universe. The changes are likely during the half-yearly review undertaken by MF industry body Amfi during the first week of July.

Meanwhile, Petronet LNG, PI Industries and Hindustan Petroleum Corporation (HPCL) could get demoted from the large-cap list to mid-cap list, as per an analysis done by Sriram Velayudhan, Vice President at IIFL Securities.

Over a dozen stocks will also move from the mid-cap universe to the small-cap universe and vice versa.

In 2017, Sebi came out with norms to define large-, mid- and small-caps. Under this, the top 100 companies in terms of their total market cap are tagged as large caps, the next 150 companies fall in the mid-cap segment and companies beyond the top 250 are all considered to be smallcaps.

Amfi is tasked with computing the ranks based on average market cap every six months. The reijig in July will be based on the January-June 2021 stock price movements.

Equity mutual fund (MF) schemes have to rebalance their holdings as per the changes. Usually, the changes don’t result in significant churn of holdings like it does in case of exchange traded funds (ETFs). Most actively-managed schemes have enough leeway to dabble in stocks outside their core mandate.

For instance, a large-cap equity scheme is required to deploy a minimum of 80 per cent of its corpus towards large-cap companies. This gives the fund managers enough flexibility to continue to hold onto stocks even if they move out of the large-cap universe. Similarly, mid- and small-cap schemes need to have minimum investment of 65 per cent in stocks falling in their universe.

However, the six stocks that are likely to added to the largecap universe (see table) are currently under-owned by equity fund managers. Some believe this could lead to some buying by large-cap schemes, which is one of the biggest sub-category of the equity segment.