AMFI stock category rejig: Paytm, Bandhan Bank can get downgraded to midcap

In its upcoming semi-annual list of stocks, Association of Mutual Funds in India (AMFI) is highly likely to downgrade Bandhan Bank and One 97 Communication ( Paytm) from largecap to midcap category, according to a report by ICICI Securities.

The AMFI rejig will majorly be classified by size, taking into account data from July to December 2022. This period saw rising valuations as the Indian equity market rose by over 5% with Nifty and Sensex at record highs.

Digital financial services firm One 97 Communication, parent company of Paytm which got listed last year, recently announced the approval of buyback of shares worth up to Rs 850 crore. The company has a liquidity of Rs 9,182 crore, as per its last earnings report. Shares of the company rose 5% on Thursday, whereas it has fallen 61% year-to-date.

Paytm and Bandhan Bank are among six stocks with a high probability to get downgraded to midcap category.

Whereas the report said stocks that are likely to see upgrades from mid- to large-size and small- to mid-size are largely from cyclical sectors such as — industrials, banks and discretionary consumption.

The report suggested that bank stocks, especially PSUs, which have significantly outperformed over H2CY22, are likely to observe significant improvement in market-cap size ranking within their respective categories (large, mid, and small).

“However, they have not been able to jump categories (small to mid, and mid to large) in large numbers and have only been able to improve their rank within a size category,” it said.

Upgrades

From mid- to large-cap
Stocks such as Varun Beverages, ABB and Page industries, which rallied up to 45% over the lower limit, have a high probability to get upgraded to the large-cap category.


From small- to mid-cap
Stocks such as Timken India, Metro Brands, Blue Dart, Fine Organic, ZF Commercial, KPIT Tech, Apollo Tyres and UCO bank might get upgraded to mid-cap category. The stocks have jumped up to 41% over the lower limit.


Downgrades

From large- to mid-cap
Stocks such as Piramal Enterprise, Gland Pharma, Mphasis, Bandhan Bank, One 97 Communications and Muthoot Finance have plunged up to 43% below their lower limit and have a high probability to get downgraded.


From mid to small
Tanla Platforms, Chambal Fertilizer, Indian Energy Ex, National Aluminium, Godrej Industries and New India Assurance Financial Services are 35% below their lower limits.


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