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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

Last evening, the Index Maintenance Sub-Committee (IMSC) of NSE Indices announced the results of the March index review for the <a href="https://www.smartkarma.com/entities/nifty-index" target="_blank" data-smartkarma-citation="entities:23617:1" rel="noopener">NIFTY Index (NIFTY INDEX)</a>. The rebalance will be effective after the close of trading on 30 March and passive funds will need to trade at the close (VWAP over the last 30 minutes of trading) on the day.<a href="https://www.smartkarma.com/entities/tata-consumer-products" target="_blank" data-smartkarma-citation="entities:258:1" rel="noopener">Tata Consumer Products (TATACONS IN)</a> has been included in the index and replaces <a href="https://www.smartkarma.com/entities/gail-india-ltd" target="_blank" data-smartkarma-citation="entities:15263:1" rel="noopener">Gail India Ltd (GAIL IN)</a>. This is in line with what we expected and makes <a href="https://www.smartkarma.com/entities/tata-consumer-products" target="_blank" data-smartkarma-citation="entities:258:1" rel="noopener">Tata Consumer Products (TATACONS IN)</a> the fifth Tata group company to be included in the index.NSE indices have also announced a number of changes to other indices. There are 7 changes to the NIFTY Next 50 (which together with the NIFTY 50 makes up the NIFTY 100) with <a href="https://www.smartkarma.com/entities/adani-enterprises-ltd" target="_blank" data-smartkarma-citation="entities:245:1" rel="noopener">Adani Enterprises (ADE IN)</a>, <a href="https://www.smartkarma.com/entities/apollo-hospitals-enterprise" target="_blank" data-smartkarma-citation="entities:880:1" rel="noopener">Apollo Hospitals Enterprise (APHS IN)</a>, <a href="https://www.smartkarma.com/entities/gail-india-ltd" target="_blank" data-smartkarma-citation="entities:15263:1" rel="noopener">Gail India Ltd (GAIL IN)</a>, <a href="https://www.smartkarma.com/entities/jubilant-foodworks-ltd" target="_blank" data-smartkarma-citation="entities:986:1" rel="noopener">Jubilant Foodworks (JUBI IN)</a>, <a href="https://www.smartkarma.com/entities/mrf-ltd" target="_blank" data-smartkarma-citation="entities:2930:1" rel="noopener">Mrf Ltd (MRF IN)</a>, <a href="https://www.smartkarma.com/entities/vedanta-ltd" target="_blank" data-smartkarma-citation="entities:514:1" rel="noopener">Vedanta Ltd (VEDL IN)</a> and <a href="https://www.smartkarma.com/entities/yes-bank-ltd" target="_blank" data-smartkarma-citation="entities:767:1" rel="noopener">Yes Bank (YES IN)</a> replacing <a href="https://www.smartkarma.com/entities/bank-of-baroda" target="_blank" data-smartkarma-citation="entities:545:1" rel="noopener">Bank Of Baroda (BOB IN)</a>, <a href="https://www.smartkarma.com/entities/container-corp-of-india-ltd" target="_blank" data-smartkarma-citation="entities:17912:1" rel="noopener">Container Corp of India (CCRI IN)</a>, <a href="https://www.smartkarma.com/entities/general-ins-corp-of-india" target="_blank" data-smartkarma-citation="entities:25944:1" rel="noopener">General Insurance Corp Of India (GICRE IN)</a>, <a href="https://www.smartkarma.com/entities/hindustan-zinc-ltd" target="_blank" data-smartkarma-citation="entities:8688:1" rel="noopener">Hindustan Zinc (HZ IN)</a>, <a href="https://www.smartkarma.com/entities/oracle-financial-services" target="_blank" data-smartkarma-citation="entities:7775:1" rel="noopener">Oracle Financial Services (OFSS IN)</a>, <a href="https://www.smartkarma.com/entities/power-finance-corporation" target="_blank" data-smartkarma-citation="entities:13579:1" rel="noopener">Power Finance (POWF IN)</a> and <a href="https://www.smartkarma.com/entities/tata-consumer-products" target="_blank" data-smartkarma-citation="entities:258:1" rel="noopener">Tata Consumer Products (TATACONS IN)</a>.Changes have also been made to the index methodology. The main change from the perspective of the <a href="https://www.smartkarma.com/entities/nifty-index" target="_blank" data-smartkarma-citation="entities:23617:1" rel="noopener">NIFTY Index (NIFTY INDEX)</a> is that the index reviews will be effective after the close on the second last working day of the review month. The existing methodology specifies that the index review will be effective after the close on the F&amp;O expiry day (last Thursday) of the review month.<div class="content-highlight">This Insight has been marked as Bullish since TATACONS could outperform its peers in the near term.</div>

Last evening, the Index Maintenance Sub-Committee (IMSC) of NSE Indices announced the results of the March index review for the NIFTY Index (NIFTY INDEX). The rebalance will be effective after the close of trading on 30 March and passive funds will need to trade at the close (VWAP over the last 30 minutes of trading) on the day.Tata Consumer Products (TATACONS IN) has been included in the index and replaces Gail India Ltd (GAIL IN). This is in line with what we expected and makes Tata Consumer Products (TATACONS IN) the fifth Tata group company to be included in the index.NSE indices have also announced a number of changes to other indices. There are 7 changes to the NIFTY Next 50 (which together with the NIFTY 50 makes up the NIFTY 100) with Adani Enterprises (ADE IN), Apollo Hospitals Enterprise (APHS IN), Gail India Ltd (GAIL IN), Jubilant Foodworks (JUBI IN), Mrf Ltd (MRF IN), Vedanta Ltd (VEDL IN) and Yes Bank (YES IN) replacing Bank Of Baroda (BOB IN), Container Corp of India (CCRI IN), General Insurance Corp Of India (GICRE IN), Hindustan Zinc (HZ IN), Oracle Financial Services (OFSS IN), Power Finance (POWF IN) and Tata Consumer Products (TATACONS IN).Changes have also been made to the index methodology. The main change from the perspective of the NIFTY Index (NIFTY INDEX) is that the index reviews will be effective after the close on the second last working day of the review month. The existing methodology specifies that the index review will be effective after the close on the F&amp;O expiry day (last Thursday) of the review month.This Insight has been marked as Bullish since TATACONS could outperform its peers in the near term.

NIFTY50 Index Rebalance: TATACONS In, GAIL Out; Methodology Changes Too

The Indian mutual fund industry has assets of almost INR 5 trillion across Multi cap, Large Cap, Large and Mid Cap, Mid Cap and Small 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.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.In the upcoming recategorization in January 2021, we see 6 stocks moved from the mid cap segment to the large cap segment with an equal number of stocks moving the other way, and 12 stocks are expected to move from the small cap segment to the mid cap segment with the same number moving the other way. There are quite a few IPOs that will join the small cap list, with just 1 joining the large cap list and 1 joining the mid cap list.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.

The Indian mutual fund industry has assets of almost INR 5 trillion across Multi cap, Large Cap, Large and Mid Cap, Mid Cap and Small 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.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.In the upcoming recategorization in January 2021, we see 6 stocks moved from the mid cap segment to the large cap segment with an equal number of stocks moving the other way, and 12 stocks are expected to move from the small cap segment to the mid cap segment with the same number moving the other way. There are quite a few IPOs that will join the small cap list, with just 1 joining the large cap list and 1 joining the mid cap list.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: AMFI Stock Categorization Changes to Drive Active Portfolio Churn

SBI Cards & Payment Services / Event-Driven

Once up a time in India, there was a smorgasbord of mutual fund schemes launched by different fund houses. The same fund house had myriad schemes that were almost identical to each other. Different fund houses has similar sounding schemes that invested in stocks that were nothing like each other. Fund houses had discretion in determining parameters that assigned stocks to large cap, mid cap and small cap categories.Finally in 2017, the Securities and Exchange Board of India (SEBI) stepped in and created a framework to bring in uniformity and standardize scheme categories and the characteristics of each category. The implementation was left up to the Association of Mutual Funds in India (AMFI).AMFI publishes a list of stocks every January and July using data from the previous six months to categorize stocks into large cap, mid cap and small cap segments of the market. Mutual funds have one month to rebalance their portfolios to adhere to the new categorization.For the six months ending 30 June 2020, we see quite a few changes due to the volatility in the markets and active fund managers will need to buy/sell these stocks to align with the new categorization. These category changes throw up trading opportunities due to the large AUM tracking these schemes.  The changes should be announced in a few days.<table class="table table-striped">
<colgroup>
<col>
<col>
<col>
<col>
</colgroup>
<tbody>
<tr>
<td colspan="2" style="width: 301pt;">MID CAP TO LARGE CAP</td>
<td colspan="2" style="width: 333pt;">LARGE CAP TO MID CAP</td>
</tr>
<tr>
<td>Code</td>
<td>Name</td>
<td>Code</td>
<td>Name</td>
</tr>
<tr>
<td>SBIC.NS</td>
<td>SBI Cards and Payment Services Ltd</td>
<td>PIRA.NS</td>
<td>Piramal Enterprises Ltd</td>
</tr>
<tr>
<td>ADNA.NS</td>
<td>Adani Green Energy Ltd</td>
<td>PWFC.NS</td>
<td>Power Finance Corporation Ltd</td>
</tr>
<tr>
<td>ABOT.NS</td>
<td>Abbott India Ltd</td>
<td>YESB.NS</td>
<td>Yes Bank Ltd</td>
</tr>
<tr>
<td>IGAS.NS</td>
<td>Indraprastha Gas Ltd</td>
<td>ACC.NS</td>
<td>ACC Ltd</td>
</tr>
<tr>
<td>CADI.NS</td>
<td>Cadila Healthcare Ltd</td>
<td>KANE.NS</td>
<td>Kansai Nerolac Paints Ltd</td>
</tr>
<tr>
<td>ALKE.NS</td>
<td>Alkem Laboratories Ltd</td>
<td>RECM.NS</td>
<td>REC Ltd</td>
</tr>
<tr>
<td>TACN.NS</td>
<td>Tata Consumer Products Ltd</td>
<td>ABB.NS</td>
<td>ABB India Ltd</td>
</tr>
<tr>
<td>MRF.NS</td>
<td>MRF Ltd</td>
<td>ORCL.NS</td>
<td>Oracle Financial Services Software Ltd</td>
</tr>
<tr>
<td>WHIR.NS</td>
<td>Whirlpool of India Ltd</td>
<td>ZEE.NS</td>
<td>Zee Entertainment Enterprises Ltd</td>
</tr>
<tr>
<td colspan="2">SMALL CAP TO MID CAP</td>
<td colspan="2">MID CAP TO SMALL CAP</td>
</tr>
<tr>
<td>Code</td>
<td>Name</td>
<td>Code</td>
<td>Name</td>
</tr>
<tr>
<td>SUMH.NS</td>
<td>Sumitomo Chemical India Ltd</td>
<td>INDB.NS</td>
<td>Indiabulls Ventures Ltd</td>
</tr>
<tr>
<td>RCSY.NS</td>
<td>Ruchi Soya Industries Ltd</td>
<td>SHCU.NS</td>
<td>Shriram City Union Finance Ltd</td>
</tr>
<tr>
<td>ESCO.NS</td>
<td>Escorts Ltd</td>
<td>UJJI.NS</td>
<td>Ujjivan Small Finance Bank Ltd</td>
</tr>
<tr>
<td>CBI.NS</td>
<td>Central Bank of India Ltd</td>
<td>MRPL.NS</td>
<td>Mangalore Refinery and Petrochemicals Ltd</td>
</tr>
<tr>
<td>TBEI.NS</td>
<td>Tube Investments of India Ltd</td>
<td>EDEL.NS</td>
<td>Edelweiss Financial Services Ltd</td>
</tr>
<tr>
<td>JULS.NS</td>
<td>Jubilant Life Sciences Ltd</td>
<td>EIHO.NS</td>
<td>EIH Ltd</td>
</tr>
<tr>
<td>ITEL.NS</td>
<td>ITI Ltd</td>
<td>FLFL.NS</td>
<td>Future Lifestyle Fashions Ltd</td>
</tr>
<tr>
<td>METP.NS</td>
<td>Metropolis Healthcare Ltd</td>
<td>PNBH.NS</td>
<td>PNB Housing Finance Ltd</td>
</tr>
<tr>
<td>TTKL.NS</td>
<td>TTK Prestige Ltd</td>
<td colspan="2" rowspan="3"></td>
</tr>
<tr>
<td>JMSH.NS</td>
<td>JM Financial Ltd</td>
</tr>
<tr>
<td>SHEF.NS</td>
<td>Sheela Foam Ltd</td>
</tr>
</tbody>
</table>

Once up a time in India, there was a smorgasbord of mutual fund schemes launched by different fund houses. The same fund house had myriad schemes that were almost identical to each other. Different fund houses has similar sounding schemes that invested in stocks that were nothing like each other. Fund houses had discretion in determining parameters that assigned stocks to large cap, mid cap and small cap categories.Finally in 2017, the Securities and Exchange Board of India (SEBI) stepped in and created a framework to bring in uniformity and standardize scheme categories and the characteristics of each category. The implementation was left up to the Association of Mutual Funds in India (AMFI).AMFI publishes a list of stocks every January and July using data from the previous six months to categorize stocks into large cap, mid cap and small cap segments of the market. Mutual funds have one month to rebalance their portfolios to adhere to the new categorization.For the six months ending 30 June 2020, we see quite a few changes due to the volatility in the markets and active fund managers will need to buy/sell these stocks to align with the new categorization. These category changes throw up trading opportunities due to the large AUM tracking these schemes.  The changes should be announced in a few days.








MID CAP TO LARGE CAP
LARGE CAP TO MID CAP


Code
Name
Code
Name


SBIC.NS
SBI Cards and Payment Services Ltd
PIRA.NS
Piramal Enterprises Ltd


ADNA.NS
Adani Green Energy Ltd
PWFC.NS
Power Finance Corporation Ltd


ABOT.NS
Abbott India Ltd
YESB.NS
Yes Bank Ltd


IGAS.NS
Indraprastha Gas Ltd
ACC.NS
ACC Ltd


CADI.NS
Cadila Healthcare Ltd
KANE.NS
Kansai Nerolac Paints Ltd


ALKE.NS
Alkem Laboratories Ltd
RECM.NS
REC Ltd


TACN.NS
Tata Consumer Products Ltd
ABB.NS
ABB India Ltd


MRF.NS
MRF Ltd
ORCL.NS
Oracle Financial Services Software Ltd


WHIR.NS
Whirlpool of India Ltd
ZEE.NS
Zee Entertainment Enterprises Ltd


SMALL CAP TO MID CAP
MID CAP TO SMALL CAP


Code
Name
Code
Name


SUMH.NS
Sumitomo Chemical India Ltd
INDB.NS
Indiabulls Ventures Ltd


RCSY.NS
Ruchi Soya Industries Ltd
SHCU.NS
Shriram City Union Finance Ltd


ESCO.NS
Escorts Ltd
UJJI.NS
Ujjivan Small Finance Bank Ltd


CBI.NS
Central Bank of India Ltd
MRPL.NS
Mangalore Refinery and Petrochemicals Ltd


TBEI.NS
Tube Investments of India Ltd
EDEL.NS
Edelweiss Financial Services Ltd


JULS.NS
Jubilant Life Sciences Ltd
EIHO.NS
EIH Ltd


ITEL.NS
ITI Ltd
FLFL.NS
Future Lifestyle Fashions Ltd


METP.NS
Metropolis Healthcare Ltd
PNBH.NS
PNB Housing Finance Ltd


TTKL.NS
TTK Prestige Ltd



JMSH.NS
JM Financial Ltd


SHEF.NS
Sheela Foam Ltd




India Stock Classification Changes - Active Portfolio Churn

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

In our October International Strategy, we outline important technical levels across markets and highlight various themes which lead to our neutral outlook, along with areas of the market where we see actionable opportunities, including Japan, and global technology.

In our October International Strategy, we outline important technical levels across markets and highlight various themes which lead to our neutral outlook, along with areas of the market where we see actionable opportunities, including Japan, and global technology.

Global Equity Strategy: Neutral Outlook Intact, Japan and Global Tech Are Bright Spots.

India - Politics, Industrials, IT and Large Caps, EMAlpha

Pankaj Sharma

India - Politics, Industrials, IT and Large Caps

Thematic (Sector/Industry)

The news flow for Indian Auto Industry is turning from bad to worse over previous few weeks as there have been multiple reports highlighting poor festival season sales, decline in numbers for vehicle registrations, sharp increase in inventory at dealers and liquidity crunch potentially impacting sales of CVs. However, November has not been that bad for several auto stocks and BSE Auto Index has also outperformed BSE SENSEX, albeit only marginally. <a href="https://www.smartkarma.com/entities/733" target="_blank" data-smartkarma-citation="entities:733:1">Maruti Suzuki India (MSIL IN)</a> , <a href="https://www.smartkarma.com/entities/2391" target="_blank" data-smartkarma-citation="entities:2391:1">Hero Motocorp (HMCL IN)</a> and <a href="https://www.smartkarma.com/entities/18316" target="_blank" data-smartkarma-citation="entities:18316:1">Eicher Motors (EIM IN)</a> have all been up approximately 10% or even more. This has led to a discussion on investment rationale in several stocks that bad news is fully in their price now and after the huge correction in the months of September and October, the market expectations have become more reasonable on how their business and financial performance will be. While this is somewhat true, we think that November sales numbers for the industry will be the real test because these figures will actually tell you how inventory has moved to end customers from dealers during the festive season. That will be a key factor in determining the near-term direction for these stocks in Indian Auto space.

The news flow for Indian Auto Industry is turning from bad to worse over previous few weeks as there have been multiple reports highlighting poor festival season sales, decline in numbers for vehicle registrations, sharp increase in inventory at dealers and liquidity crunch potentially impacting sales of CVs. However, November has not been that bad for several auto stocks and BSE Auto Index has also outperformed BSE SENSEX, albeit only marginally. Maruti Suzuki India (MSIL IN) , Hero Motocorp (HMCL IN) and Eicher Motors (EIM IN) have all been up approximately 10% or even more. This has led to a discussion on investment rationale in several stocks that bad news is fully in their price now and after the huge correction in the months of September and October, the market expectations have become more reasonable on how their business and financial performance will be. While this is somewhat true, we think that November sales numbers for the industry will be the real test because these figures will actually tell you how inventory has moved to end customers from dealers during the festive season. That will be a key factor in determining the near-term direction for these stocks in Indian Auto space.

India: News Flow Is Turning Even More Negative for Autos but Stocks Doing Well, What's Going On?

India

MRF Limited manufactures and distributes tyres and tubes for automobiles, aircrafts, motorcycles and cycles. The Company also manufactures conveyor belts, paint and coats, and hoses. Every MRF tyre designed is the result of a special acid test on the race and rally tracks.

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Mrf Ltd (MRF IN)

NIFTY50 Index Rebalance: TATACONS In, GAIL Out; Methodology Changes Too

TATACONS has been added to the NIFTY50 replacing GAIL. There are changes to a bunch of other indices too and methodology changes which shift the...

Brian Freitas

India: AMFI Stock Categorization Changes to Drive Active Portfolio Churn

The reclassification of stocks to large, mid and small cap will set off a churn in mutual fund portfolios where historically stocks migrating...

Brian Freitas

India Stock Classification Changes - Active Portfolio Churn

Once up a time in India, there was a smorgasbord of mutual fund schemes launched by different fund houses. The same fund house had myriad schemes...

Brian Freitas

Global Equity Strategy: Neutral Outlook Intact, Japan and Global Tech Are Bright Spots.

In our October International Strategy, we outline important technical levels across markets and highlight various themes which lead to our neutral...

Vermilion Research

India: News Flow Is Turning Even More Negative for Autos but Stocks Doing Well, What's Going On?

The news flow for Indian Auto Industry is turning from bad to worse over previous few weeks as there have been multiple reports highlighting poor...

Pankaj Sharma

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52-week Range

Market Cap (USDm)

P/E

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