Which mid cap and small cap stocks to invest in for expected Multi-Cap rebalancing?

Market regulator SEBI on Friday i.e September 11, 2020 has revised asset allocation norms for multi-cap equity mutual fund schemes. According to the revised rules, multi-cap mutual funds will have to invest at least 75% of their total asset under management (AUM) in equity & equity related instruments versus the earlier threshold of 65% of the total AUM. The market regulator also mandated multi-cap funds to invest at least 25% in each small-cap, mid-cap and large-cap stocks. So, if a multi-cap scheme of a fund house has an AUM of Rs 10,000 crore, it will have to invest at least Rs 2,500 crore each in the three categories of stocks. According to earlier rule, multi-cap funds had freedom to invest across sectors and market capitalizations. SEBI has directed to abide by the revised rules by January 2021.

Data sourced from media reports shows at present the multi-cap fund (AUM of ~Rs1.5tn) holdings are tilted towards large cap stocks (~73% of AUM as of Aug-2020), So it is widely projected that the mutual funds would have to rebalance the portfolios by increasing allocation to midcap stocks (~17% of AUM as of Aug-2020) and small cap stocks (~6% of AUM as on Aug-2020). However, the clarification issued by SEBI (SEBI Clarification Circular) on Sunday evening also points out that portfolio rebalancing is one of the options available to mutual funds and the MF could consider options like merging with existing schemes. The clarification also suggests that SEBI is open to inputs from MF industry on the revised rules for multi-cap funds. 
We have shortlisted some of the 5 mid cap and small cap stocks that can benefit if the portfolio rebalancing was to happen. 

5 Mid Cap Stock Recommendations

_{Source:5paisa Research, BSE}

Godrej Agrovet Ltd:
Godrej Agrovet (GAVL) is a diversified, research & development-focused agri-business company. It is one of the leading companies in the animal feed business and the market leader in the oil palm plantation industry in India. Additionally, it has a sizeable presence in agri-inputs (i.e. agrochemicals), dairy products, and processed poultry.

Coromandel International Ltd.
Coromandel is the flagship company of the Murugappa Group and operates in fertilisers and other agri-input segments. It is India's second-largest producer of phosphatic fertilisers and is particularly strong in the South-Indian states of Andhra Pradesh and Telangana. Coromandel has an installed capacity of nearly 3.5m tonne of fertilisers (22% of domestic production capacity) and also operates in the agrochemical, specialty nutrient and organic compost verticals.

Ashok Leyland:
Ashok Leyland (AL), part of the Hinduja Group, is one of India's leading manufacturers of commercial vehicles such as trucks, buses, tippers, trailers and Defence vehicles. It is the second-largest player in the medium & heavy trucks segment in India, with market share of ~33%. AL is one of the leading players in heavy buses with market share of ~43%. The company also manufactures and sells engines for industrial and marine applications, spare parts and special alloy castings.

Kajaria Ceramics Ltd.
Kajaria Ceramics is the largest manufacturer of ceramic and vitrified tiles in India. The company manufactures ceramic wall & floor tiles as well as glazed & polished vitrified tiles. It has also ventured into some allied segments (like bathware, plywood); albeit, these segments are still quite small at present, in terms of contribution to revenues and profits.

Ipca Laboratories Ltd.
Ipca Labs is a fully integrated pharmaceutical company producing branded and generic formulations, APIs and intermediates. The company has a strong position in the domestic market, mainly in cardiology, pain, anti-malarial/bacterial and anti-diabetics products. The company exports to 110 countries and is the ninth-largest pharma exporter from India, in terms of volume.

5 Small Cap Stock Recommendations