AMFI List of Market Cap: Categorization of Large-, Mid- and Small-cap stocks
(This
is for information purposes only. This should not be construed as a
recommendation or investment advice even though the author is a CFA Charterholder. Please consult your financial
adviser before taking any investment decision. Safe to assume the author has a vested
interest in stocks / investments discussed if any.)
In October 2017, India's capital market regulator Securities and Exchange Board of India (SEBI) categorized mutual fund schemes into six categories, like, equity schemes, debt schemes, hybrid schemes and so on -- with a view to providing clear distinction and uniformity, in terms of asset allocation and investment strategy, to mutual fund plans.
SEBI's broad idea is investors, while assessing various mutual fund plans, should be able to properly understand the plans in terms of similarity of plans and uniformity of their characteristics.
1. SEBI Definition
In case of equity schemes, mutual funds have to invest a certain percentage of stocks in large-, mid- and small-cap stocks as per the 'type of scheme.' For example, a large-cap equity fund should invest at least 80 percent of total assets in equity and equity-related instruments of large-cap stocks.
On the other hand, a small-cap fund should have a minimum of 65 percent of total assets in equity and equity-related instruments of small-cap stocks.
When SEBI says a certain percentage of total assets has to be invested in large- or mid- or small-cap stocks, SEBI needs to define what these stocks are. Hence, SEBI decided to define stocks on the basis of their market capitalisation as follows:
1) large-cap stocks: 1st to 100th company in terms of full market capitalization
2) mid-cap stocks: 101st to 250th company in terms of full market capitalization
3) small-cap stocks: 251st company onwards in terms of full market capitalization
2. Half-yearly AMFI list
AMFI is an industry body representing all mutual fund companies in India.
AMFI prepares the list two times in a year, that is, at the end of June and December of every year. AMFI publishes the list within five calendar days from the end of the six-month period. Once the list is updated by AMFI, mutual funds need to rebalance their portfolios as per the updated list, within a period of one month.
Usually, a stock gets typically listed on BSE or NSE (National Stock Exchange of India). And some stocks get listed on MSEI (Metropolitan Stock Exchange of India) also. The average market capitalisation of all the three stock exchanges is considered while preparing the AMFI list.
How is average market cap of a stock calculated? Average market cap of a stock for the six-month period is calculated as the average market cap of the three stock exchanges. This exercise is done for all the listed stocks and they are sorted based on their market capitalisation -- and the list of all stocks is published based on SEBI definition detailed in Section 1 above.
It may be noted the six-month average market cap of a stock differs from the market cap at the six-month period.
The first such half-yearly AMFI list of average market capitalization was published in January 2018 for the six-month period June to December 2017 ending on 31Dec2017.
3. Market cap threshold
As per the Jun-Dec2017 AMFI List, the top large-cap stock was Reliance Industries, with an average market cap of Rs 548,702 crore for the six-month period ending 31Dec2017 and the 100th stock qualifying as large-cap stock was Vakrangee (market cap Rs 29,304 crore). The details of mid- and small-cap stocks are given below.
After six years, the market caps of Indian stocks have gone up substantially. As per the Jun-Dec2023 list (for the period ending 31Dec2023), the top large-cap stock is still Reliance Industries (market cap Rs 16,39,090 crore).
Table 1 showing top and bottom of large-, mid- and small-cap stocks as at the end of December every year from 2017 to 2023:
please click on the image to view better >
Table 1 above shows the total number of stocks at the end of a particular period also.
As per SEBI definition and AMFI list for Jul-Dec2023 period, stocks with an average market cap of between Rs 16,39,000 crore and Rs 67,000 crore are large-cap stocks; between Rs 64,400 crore and Rs 22,000 crore average market cap are mid-cap stocks and those below the threshold of Rs 22,000 crore average market cap are small-cap stocks.
It is ludicrous Hero Motocorp, with an average market cap of Rs 64,425 crore, is a mid-cap stock as per SEBI definition.
4. Rising market caps
please click on the image to view better >
The average market cap of top large-cap stock (Reliance Industries) has gone up by three times (200 percent rise) in the past six years, that is, between Dec2017 and Dec2023. It may be recalled the first half-yearly AMFI list was published for six-month period ending 31Dec2017.
The average market cap of the top mid-cap stock rose by 120 percent and that of the top small-cap stock by 156 percent in the past six years as shown in table 2 above.
Of course, the total market capitalisation of all BSE listed firms itself has gone up substantially. It moved from Rs 151.74 lakh crore (31Dec2017) to Rs 364.29 lakh crore (31Dec2023), a gain of 140 percent in six years.
To sum up
The article details how SEBI defines large-, mid- and small-cap stocks and how the AMFI prepares the half-yearly list. It also traces how market capitalization of stocks as defined by SEBI have moved over the years.
It is regrettable that a regulator takes away freedom from fund managers and prevents them from following the investment strategy of their choice -- of course, fund managers need to follow the mandate and investment objective of a particular scheme.
It is ridiculous that mutual fund mangers have been boxed in by SEBI in this way and they are forced to adhere to the stupid norms prescribed by SEBI on market capitalization. This is a case of a regulator micro-managing things on behalf of investors and mutual funds.
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References:
SEBI circular dated 06Oct2017 on Categorization and Rationalization of Mutual
Funds -- web archive for this circular
SEBI circular dated 04Dec2017 on Categorization and Rationalization of Mutual
Funds -- web archive for this circularAMFI list: Categorization of Large-, Mid- and Small-cap stocks
AMFI list: PDF for half-year ending Dec2023
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Disclosure: I've vested interested in Indian stocks and other investments. It's safe to assume I've interest in the financial instruments / products discussed, if any.
Disclaimer: The analysis and opinion provided here are only for information purposes and should not be construed as investment advice. Investors should consult their own financial advisers before making any investments. The author is a CFA Charterholder with a vested interest in financial markets.
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