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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

<div><p>The Indian mutual fund industry has assets of almost INR 6.6 trillion 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></div><div>
<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>At the next recategorization in July 2021, we see 7 stocks moving from the mid cap segment to the large cap segment with an equal number of stocks moving the other way, and 13 stocks are expected to move from the small cap segment to the mid cap segment with the 16 stocks moving from the mid cap to the small cap segment. There are 3 recent listings that will enter the mid cap segment with over 18 joining the small cap segment.</p>
<p>Historically, the stocks migrating upward to a higher market cap segment have outperformed stocks that migrate to a lower market cap segment over the 1 month and 2 month period post the publishing of the AMFI list. 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>
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The Indian mutual fund industry has assets of almost INR 6.6 trillion 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.
At the next recategorization in July 2021, we see 7 stocks moving from the mid cap segment to the large cap segment with an equal number of stocks moving the other way, and 13 stocks are expected to move from the small cap segment to the mid cap segment with the 16 stocks moving from the mid cap to the small cap segment. There are 3 recent listings that will enter the mid cap segment with over 18 joining the small cap segment.
Historically, the stocks migrating upward to a higher market cap segment have outperformed stocks that migrate to a lower market cap segment over the 1 month and 2 month period post the publishing of the AMFI list. 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

<div><p>Last evening post market close, the National Stock Exchange of India (NSE) published a list of three stocks that would be excluded from the Futures and Options segment of the market with effect from December 27. The list includes <a href="https://www.smartkarma.com/entities/hexaware-technologies-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:7882:1">Hexaware Technologies (HEXW IN)</a>, <a href="https://www.smartkarma.com/entities/tata-elxsi-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:13949:1">Tata Elxsi Ltd (TELX IN)</a> and <a href="https://www.smartkarma.com/entities/union-bank-of-india" target="_blank" rel="noopener" data-smartkarma-citation="entities:546:1">Union Bank Of India (UNBK IN)</a>.  </p></div><div><p>In our earlier Insights, <a href="https://www.smartkarma.com/insights/india-equity-derivatives-the-tail-wags-the-dog" target="_blank" rel="noopener" data-smartkarma-citation="insights:30878">India Equity Derivatives - The Tail Wags the Dog</a> and <a href="https://www.smartkarma.com/insights/the-tail-wags-the-dog-redux" target="_blank" rel="noopener" data-smartkarma-citation="insights:31238">The Tail Wags the Dog Redux</a>, we highlighted the performance of stocks that were excluded from the Futures and Options (F&amp;O) segment of the market in April and September this year and we recommend going short a basket of the three excluded stocks against their peers as a short term play.</p></div>

Last evening post market close, the National Stock Exchange of India (NSE) published a list of three stocks that would be excluded from the Futures and Options segment of the market with effect from December 27. The list includes Hexaware Technologies (HEXW IN), Tata Elxsi Ltd (TELX IN) and Union Bank Of India (UNBK IN).  In our earlier Insights, India Equity Derivatives - The Tail Wags the Dog and The Tail Wags the Dog Redux, we highlighted the performance of stocks that were excluded from the Futures and Options (F&amp;O) segment of the market in April and September this year and we recommend going short a basket of the three excluded stocks against their peers as a short term play.

India Equity Derivatives - F&O Exclusion Trades

India

Tata Elxsi is a global design-led technology services company, specializing in product engineering, software development, and systems integration. It provides solutions across industries including Automotive, Media & Communications, and Healthcare & Life Sciences, leveraging digital technologies like AI, IoT, Cloud, and VR. The company was founded in 1989 and is headquartered in Bengaluru, India.

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Tata Elxsi (TELX IN)

India: Stock Reclassification & Active Portfolio Management

There are a lot of segment changes expected in July when AMFI recategorizes stocks and mutual funds start to rebalance their portfolios. We...

Brian Freitas

India Equity Derivatives - F&O Exclusion Trades

Last evening post market close, the National Stock Exchange of India (NSE) published a list of three stocks that would be excluded from the Futures...

Brian Freitas

Price Gauge

52-week Range

Market Cap (USDm)

P/E

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