Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

<ul>
<li>Near the end of the review period, we see 8 stocks migrating upward from Mid to Large Cap and 9 stocks migrating from Small to Mid Cap.</li>
<li>We expect 12 stocks to migrate downward from Large to Mid Cap and 19 stocks from Mid to Small Cap. Four new listings will be added to the Large Caps.</li>
<li>Historically, the upward migrating stocks have outperformed the stocks migrating lower as the active funds rebalance their portfolios to meet regulations around stocks held based on the fund classification.</li>
</ul>


Near the end of the review period, we see 8 stocks migrating upward from Mid to Large Cap and 9 stocks migrating from Small to Mid Cap.
We expect 12 stocks to migrate downward from Large to Mid Cap and 19 stocks from Mid to Small Cap. Four new listings will be added to the Large Caps.
Historically, the upward migrating stocks have outperformed the stocks migrating lower as the active funds rebalance their portfolios to meet regulations around stocks held based on the fund classification.


India: Half-Yearly Stock Reclassification for Active Funds

Index Rebalance

<ul>
<li>As expected, the December review of the <a href="https://www.smartkarma.com/entities/s-p-bse-sensex-index" target="_blank" data-smartkarma-citation="entities:31494:1" rel="noopener">S&amp;P BSE SENSEX Index (SENSEX INDEX)</a> sees <a href="https://www.smartkarma.com/entities/wipro-ltd" target="_blank" data-smartkarma-citation="entities:15360:1" rel="noopener">Wipro Ltd (WPRO IN)</a> added and <a href="https://www.smartkarma.com/entities/bajaj-auto-ltd" target="_blank" data-smartkarma-citation="entities:3613:1" rel="noopener">Bajaj Auto Ltd (BJAUT IN)</a> deleted.</li>
<li>Buying on Wipro is 2.5 days of ADV and 8.2 days of delivery volume, while selling on Bajaj Auto is 4.5 days of ADV and 8.9 days of delivery volume.</li>
<li>The overweight of the Information Technology sector in the Sensex gets even bigger and the Consumer Discretionary sector gets even more underweighted vs the BSE All Cap Index.</li>
</ul>


As expected, the December review of the S&amp;P BSE SENSEX Index (SENSEX INDEX) sees Wipro Ltd (WPRO IN) added and Bajaj Auto Ltd (BJAUT IN) deleted.
Buying on Wipro is 2.5 days of ADV and 8.2 days of delivery volume, while selling on Bajaj Auto is 4.5 days of ADV and 8.9 days of delivery volume.
The overweight of the Information Technology sector in the Sensex gets even bigger and the Consumer Discretionary sector gets even more underweighted vs the BSE All Cap Index.


SENSEX Dec 21 Index Rebalance: Wipro Added, Bajaj Auto Deleted

External broker reports(aggregated public sources), Edelweiss Broking Limited

Edelweiss

External broker reports(aggregated public sources)

Edelweiss Broking Limited

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Equity Bottom-Up

<p>SRF posted strong top line performance driven by growth across all 3 segments. Company saw improved volumes and higher realizations for several key products, however PAT came below our estimates (-9%) due to higher raw materials and logistic costs.</p><div class="content-highlight"><em>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.</em></div>

SRF posted strong top line performance driven by growth across all 3 segments. Company saw improved volumes and higher realizations for several key products, however PAT came below our estimates (-9%) due to higher raw materials and logistic costs.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

SRF Ltd: Demand Led Top-Line Growth; Outlook Remains Positive

<p>The Indian mutual fund industry has assets of almost INR 7.93 trillion (US$106.3bn) across Multi cap, Large Cap, Large and Mid Cap, Mid Cap, Small Cap and Flexi Cap equity schemes. Equity schemes classified as large cap need to have at least 80% of their assets invested in large cap stocks, large and mid cap schemes need to have at least 35% of their assets in large cap stocks and at least 35% in mid cap stocks, mid cap funds need to hold at least 65% of their assets in mid cap stocks, and small cap funds need to hold at least 65% of their assets in small cap stocks. Flexi cap funds can invest across market caps.</p><p>The Association of Mutual Funds in India (AMFI) publishes the list of the stocks in each market cap segment in January and July each year and mutual funds have one month to rebalance their portfolios to adhere to the new categorization.</p><p>We are just past halfway through the review period for the second half of 2021. Using data to the close on 4 October, at the next recategorization in January 2022, we see 10 stocks moving from the mid cap segment to the large cap segment, 11 stocks moving from the large cap segment to the mid cap segment , 11 stocks are expected to move from the small cap segment to the mid cap segment, with16 stocks moving from the mid cap to the small cap segment. <a href="https://www.smartkarma.com/entities/zomato-media-pvt" target="_blank" data-smartkarma-citation="entities:28820:1" rel="noopener">Zomato (ZOMATO IN)</a> will be a part of the large cap universe, while 4 other newly listed stocks will be a part of the mid cap universe.</p><p>Historically, stocks moving to a higher market cap category have outperformed stocks that migrate to a lower market cap category over the back half of the review period. In some cases, the outperformance continues past the announcement of the changes as well. This can be attributed to fund managers realigning their portfolios to meet the new categorization. This provides opportunities to pre-position for the move and unwind post the announcement of the reclassification.</p>

The Indian mutual fund industry has assets of almost INR 7.93 trillion (US$106.3bn) across Multi cap, Large Cap, Large and Mid Cap, Mid Cap, Small Cap and Flexi Cap equity schemes. Equity schemes classified as large cap need to have at least 80% of their assets invested in large cap stocks, large and mid cap schemes need to have at least 35% of their assets in large cap stocks and at least 35% in mid cap stocks, mid cap funds need to hold at least 65% of their assets in mid cap stocks, and small cap funds need to hold at least 65% of their assets in small cap stocks. Flexi cap funds can invest across market caps.The Association of Mutual Funds in India (AMFI) publishes the list of the stocks in each market cap segment in January and July each year and mutual funds have one month to rebalance their portfolios to adhere to the new categorization.We are just past halfway through the review period for the second half of 2021. Using data to the close on 4 October, at the next recategorization in January 2022, we see 10 stocks moving from the mid cap segment to the large cap segment, 11 stocks moving from the large cap segment to the mid cap segment , 11 stocks are expected to move from the small cap segment to the mid cap segment, with16 stocks moving from the mid cap to the small cap segment. Zomato (ZOMATO IN) will be a part of the large cap universe, while 4 other newly listed stocks will be a part of the mid cap universe.Historically, stocks moving to a higher market cap category have outperformed stocks that migrate to a lower market cap category over the back half of the review period. In some cases, the outperformance continues past the announcement of the changes as well. This can be attributed to fund managers realigning their portfolios to meet the new categorization. This provides opportunities to pre-position for the move and unwind post the announcement of the reclassification.

India: Stock Reclassification & Active Portfolio Management (Dec 2021)

External broker reports(aggregated public sources), HDFC Securities

HDFC Securities

<p>HSIE Results Daily Tech Mahindra: We maintain a BUY rating on Tech Mahindra (TechM), based on better-than-expected revenue performance, healthy net-new deal wins (in both telecom and enterprise segments), and in-line margins. TechM delivered 3.9% QoQ CC growth, which was broad-based across verticals. The focus on large deal wins (net-new TCV of USD 815mn), following a healthy Q4 (Telefonica deal), improves growth visibility. The key attributes that underscore our positive outlook are (1) the largest deal win in the healthcare vertical (patient care modernisation); (2) healthy growth in BPS; (3) increase in intake of freshers after six quarters; (4) improvement in 5G related deals (~50% of telecom deals are related to 5G); and (5) continued growth momentum in enterprise segment, led by technology, BFSI and manufacturing verticals.</p><div class="content-highlight"><em>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.</em></div>

HSIE Results Daily Tech Mahindra: We maintain a BUY rating on Tech Mahindra (TechM), based on better-than-expected revenue performance, healthy net-new deal wins (in both telecom and enterprise segments), and in-line margins. TechM delivered 3.9% QoQ CC growth, which was broad-based across verticals. The focus on large deal wins (net-new TCV of USD 815mn), following a healthy Q4 (Telefonica deal), improves growth visibility. The key attributes that underscore our positive outlook are (1) the largest deal win in the healthcare vertical (patient care modernisation); (2) healthy growth in BPS; (3) increase in intake of freshers after six quarters; (4) improvement in 5G related deals (~50% of telecom deals are related to 5G); and (5) continued growth momentum in enterprise segment, led by technology, BFSI and manufacturing verticals.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

HSIE Results Daily 30 July 2021: Tech Mahindra, SRF Ltd, Colgate Palmolive and More

India

SRF Limited is a multi-business Indian multinational engaging in the manufacture of chemical based industrial intermediates. The Company has a business portfolio that encompasses technical textiles, chemicals, packaging films and engineering plastics.

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SRF Ltd (SRF IN)

India: Half-Yearly Stock Reclassification for Active Funds

Upward migrations include 8 stocks from MidCap to LargeCap & 9 from SmallCap to MidCap. 4 new listings will join the LargeCaps and 6 new listings...

Brian Freitas

SENSEX Dec 21 Index Rebalance: Wipro Added, Bajaj Auto Deleted

Wipro will be added to the Sensex in December while Bajaj Auto will be deleted. Impact on both stocks is over 8 days of delivery volume to trade....

Brian Freitas

SRF Ltd: Demand Led Top-Line Growth; Outlook Remains Positive

SRF posted strong top line performance driven by growth across all 3 segments. Company saw improved volumes and higher realizations for several key...

Edelweiss

India: Stock Reclassification & Active Portfolio Management (Dec 2021)

Halfway through the review period, we take a look at stocks that could migrate across the large, mid and small cap segments. With over US$100bn of...

Brian Freitas

HSIE Results Daily 30 July 2021: Tech Mahindra, SRF Ltd, Colgate Palmolive and More

HSIE Results Daily Tech Mahindra: We maintain a BUY rating on Tech Mahindra (TechM), based on better-than-expected revenue performance, healthy net...

HDFC Securities

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