State-Run Banks Stand To Gain From SEBI’s Stock Reclassification, Says Philip Capital

State-run banks are among the companies that are expected to benefit from the market regulator’s reclassification of stocks based on their market value, according to Philip Capital.

The Securities and Exchange Board of India reviews and classifies stocks every six months based on the company’s average market value over the six months. The last such exercise was conducted in December.

Accordingly, the top 100 stocks by market value would be classified as large caps, with the next 150 and the rest categorised as mid caps and small caps, respectively. This, the market regulator said, would “ensure uniformity in respect of the investment universe for equity schemes”.

The brokerage, which identified the stocks that can potentially be upgraded or downgraded in a recent report, said nearly 61 percent of companies that were upgraded returned positive gains to investors after the change in classification, as of June 24. In comparison, 74 percent of companies returned negative gains after a downgrade.

Among the state-run banks that are expected to receive an upgrade include Punjab National Bank Ltd., Corporation Bank Ltd., Allahabad Bank and Oriental Bank of Commerce Ltd., according to Philip Capital.

State-run banks have outperformed the Nifty Midcap Index in the last six months.