Slew of Digital IPOs Classified as Large Caps by AMFI
Every 6 months, the Association of Mutual Funds of India (AMFI), as instructed by SEBI, finalizes the list of large cap, mid-cap and small stocks in India. The allocation of various large cap, mid-cap and small cap funds will be benchmarked with respect to stocks included in the said list.
This half year was special because many large sized companies with large size market capitalization like Nykaa, Zomato, Paytm and Policybazaar were listed on the bourses. While Policybazaar had a market cap of Rs.50,000 crore, the market cap of Zomato, Nykaa and Paytm is in the vicinity of Rs.100,000 crore. Many of these companies got added in the large cap list of AMFI. But first the methodology.
How are companies classified as large caps, mid-caps and small caps?
For a long time, SEBI used the numerical cut-off to decide whether the particular company was a large cap or a small cap or a mid-cap. However, that was subjective and vulnerable to non-representation if market caps changed rapidly. The current methodology is based on relative market rankings rather than numerical cut-offs. Here is how it works.
1) All the companies listed on the stocks exchanges are indexed descending on market cap, starting with the company with the highest market and moving lower. The Top-100 companies in this list will qualify as large-cap stocks.
2) Companies ranked from 101 to 250 will be classified as mid-cap companies. Currently, at the present market levels, companies with market cap above Rs.47,000 crore become large caps and companies with market cap between Rs.16,000 crore and Rs.47,000 crore become mid-caps.
3) Finally, companies ranked from 251 and below shall be classified as small caps for the purpose of mutual fund portfolio determination. These companies typically have a market of less than Rs.16,000 crore.
Major changes in the latest AMFI classification
Some of the key changes in market cap classifications as of December 2021 are as under.
• The four digital IPO entrants of Zomato, Nykaa, Paytm and Policybazaar have automatically got into the large cap league. In addition, the other 9 companies that got into large caps were Mindtree, SRF, IRCTC, Tata Power, Mphasis, Godrej Properties, Macrotech Developers, Bharat Electronics and JSW Energy.
• A total of 20 companies were lowered from large caps to mid-caps. These include some marquee names like Bandhan Bank, Bosch, Aurobindo, NMDC, Lupin, Biocon, PNB, Devyani International, Colgate Palmolive among other.
• While another 20 stocks got lowered from mid-caps to small caps, there were a total of 32 IPO stocks that made their debut in the small cap category. These include Metro Brands, Latent View, Chemplast, Glenmark Life, Sapphire Foods, Paras Defence etc.
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