Multiple investment experts are now highlighting largecap stocks as attractive opportunities after a year of midcap and smallcap outperformance. According to ETMarkets, Chandraprakash Padiyar, Senior Fund Manager at Tata Asset Management, notes that after a year of midcap and smallcap outperformance, largecap stocks are beginning to look more attractive as earnings growth is expected to improve and valuations remain at or below historical averages. Rishi Kohli, Chief Investment Officer at JioBlackRock Asset Management Company, believes largecap stocks offer better opportunities than mid and smallcaps at current levels. As per CNBC TV18, Kohli stated that largecaps are getting valuations at discounts when compared to the last 10-15 years, though they are not cheap by historical standards. The shift reflects changing market dynamics where valuations in pockets are expensive and in pockets attractive as well, requiring selective investment approaches.
Despite largecap attractiveness, experts emphasize that the opportunity in the broader market is far from over, with selective midcap and smallcap companies continuing to offer potential for long-term investors. According to ETMarkets, Padiyar explains that we also believe that selectively there are good opportunities to be picked in the mid cap and the small cap segment of the market. Bottom-up stock picking with higher concentration is the way to go in the foreseeable future. As reported by CNBC TV18, the recent performance of large, mid and smallcap stocks has largely reflected differences in earnings growth, with midcaps having benefited from relatively consistent earnings delivery while smallcaps have performed better in recent months. The performance divergence has created valuation gaps that could favour reversals over the medium term, though technical indicators suggest the relative performance of smallcaps may be approaching a turning point.
A promising wealth-creation theme emerging is manufacturing, backed by improving cost competitiveness, strong balance sheets and ambitions to scale up globally. According to ETMarkets, Padiyar notes that we are increasingly hearing comments by some management teams in the manufacturing space claiming to have cost structures equal to or lower than China. In my 26 years of equity research this is the first time Indian entrepreneurs are as excited given the competitiveness. Companies are planning for large capital expenditure and importantly balance sheet for these companies are strong enough to help them scale on a sustainable basis. This manufacturing revival could provide the next generation of small- and midcap wealth creators, offering selective opportunities despite broader market challenges.
Experts recommend bottom-up stock selection rather than making investment decisions based solely on market capitalisation. As reported by ETMarkets, Padiyar explains that earnings visibility, cash-flow generation, return on capital and reasonable valuations remain critical to identifying sustainable wealth creators amid global uncertainties. For investors, the distinction between short-term recovery and sustained improvement in fundamentals will be important when assessing IT stocks. Thematic/sector/market cap specific funds should be played tactically depending on the market environment, with selective opportunities still available in smallcap segments. From a medium-term perspective, the IT sector faces persistent challenges, while manufacturing and selective opportunities across market capitalisations could provide more attractive risk-reward scenarios.
According to CNBC TV18, Kotak Institutional Equities CEO Pratik Gupta notes that the recent correction has made largecap Indian stocks more attractive, but a sustained rally depends on lower crude oil prices, easing global bond yields and stronger earnings growth. Gupta emphasized that "We're not exactly out of the woods," pointing to crude oil prices above $100 a barrel and elevated global bond yields as key headwinds for emerging markets. He explained that while tax reforms alone would not bring foreign money back into India, changes to capital gains taxation could improve India's appeal to foreign investors, while favouring sectors such as private banks, telecom, autos, hotels and domestic pharma. Gupta remains constructive on India's telecom sector, citing improving industry structure and rising free cash flow, expecting companies to benefit as most 5G capital expenditure cycles are complete.
