According to The Economic Times, Axis AMC's Head of Equity Shreyash Devalkar notes that despite two years of muted index returns and a record ₹2.85 lakh crore FII selloff in 2026, the underlying economy shows resilience with healthy earnings growth of 14-15% in Q4. The AI trade has driven global investors toward AI-linked markets, creating headwinds for Indian markets despite their high single-digit nominal GDP growth. Devalkar emphasizes that while macro factors including FII flows, rupee concerns, and crude oil prices are impacting headlines, the government and RBI's quick response measures could prove meaningful for market stability.
As reported by The Economic Times, large caps are reasonably priced but growth is anchored to nominal GDP, limiting their outperformance potential. Banks, FMCG companies, IT, autos, and telecom face growth ceilings tied to GDP rates, offering valuation comfort but growth risk. In contrast, mid and small caps present growth opportunities in sectors like renewable power, data centres, EV transition, hospitals, and capital-markets-linked businesses. However, Devalkar warns that valuations in these sectors have run up significantly, with the cycle of money rotating from large caps to mid and small caps continuing since 2024.
According to The Economic Times, Axis AMC's funds maintain strict mandate adherence with large-cap funds holding almost entirely large caps, while multicap and balanced advantage funds maintain balanced exposure across growth and value segments. The firm is taking active steps to manage valuation risk, with mid-cap allocation in multicap funds reduced to 25% from the permitted 30-35%, and mid-cap allocation in Large & Midcap funds at 65% rather than approaching 75%. Devalkar notes that expensive valuations extend beyond mid and small caps, with Nifty Next 50's bottom 25 names also trading at full valuations.
As reported by The Economic Times, SIP remains the preferred investment approach for fresh money, as lump sum investments lack clear justification given current market conditions. Devalkar advises that IT sector is not a buy-and-hold proposition at current levels, with 3-5% earnings growth insufficient to justify equity risk compared to fixed-income alternatives. He suggests that IT stocks may see periodic pullback trades around specific news flow rather than sustained re-rating, making it more suitable for trade opportunities than long-term compounding. The analysis comes as investors question market direction following the prolonged period of underperformance.
