According to The Economic Times, Rahul Baijal, Senior Fund Manager – Equities at HDFC AMC, believes large-cap stocks are emerging as the more compelling segment of India's equity market following the sharp rally in mid- and small-cap shares. While valuations across the broader market have moderated from their September 2024 peaks, Baijal sees blue-chip companies offering a stronger mix of earnings visibility, governance and relative valuation comfort. The midcap 150 and small cap 250 indices have seen a positive rally CYTD, but the premium trading at headline indices has significantly moderated from their highs of September 2024 levels. Recent market developments show IT stocks witnessing upmoves on more than one occasion this week, with the Nifty moving alongside these gains, indicating potential rotation from mid-cap to large-cap segments.
A new report by Axis Mutual Fund reveals significant differences in how fund categories approach market capitalization exposure. Flexi-cap funds remain heavily biased towards large-cap stocks with 61% allocation, maintaining this trend consistently over the past five years. According to the latest data, large-cap exposure in flexi-cap funds has ranged from 60-66% since March 2022, while mid-cap and small-cap allocations have fluctuated between 15-18%. In contrast, multi-cap funds maintain a more balanced structure with 40% large-cap exposure as of March 2026, gradually declining from 42% in March 2022. The report notes that multi-cap funds have delivered 15.3% annualized returns over three years compared to flexi-cap funds' 12.9%, demonstrating the benefits of diversified exposure across market segments.
A new report by Axis Mutual Fund identifies six factors strengthening the case for large-cap companies in the coming years. 1. Improving economic growth could support earnings as historically, large-cap earnings trajectory has been closely aligned with nominal GDP growth. Unlike mid- and small-cap companies that can grow rapidly by entering new markets, large-cap companies typically rely on broader economic drivers such as credit growth, consumption, capital expenditure and global demand. 2. Credit growth and consumption remain supportive with bank credit growth starting to pick up after remaining subdued for nearly three years, signalling improving confidence among businesses and consumers. 3. Valuations are relatively more attractive as many large-cap sectors including private banks, IT services and the Nifty 50 continue to trade near or below their historical valuation levels, while several mid- and small-cap segments have seen sharp valuation expansion since 2019.
As reported by The Economic Times, the HDFC Large Cap Fund follows an investing style that is a blend of GARP (growth at reasonable price) and value, with portfolio construction done from a medium to long-term perspective using a bottom-up approach to stock picking. The strategy emphasizes companies' positioning and trends in business, sector and valuation cycles, with a strong risk management framework overlay aiming for optimal diversification. Baijal notes that large cap valuations look reasonable versus their own history and versus premium to other emerging markets, and the fund's quality bias and growth mix of stocks has increased significantly over the last 12-18 months. The fund maintains very low or almost zero allocation in IT services based on the sector outlook and current AI play, which has helped relative performance despite IT stocks correcting significantly.
According to the Axis MF report, 4. Export-oriented sectors could gain as the rupee has weakened significantly over the past 18 months against most major currencies, improving the competitiveness of export-oriented businesses. The report identifies sectors such as IT, pharmaceuticals, engineering, specialty chemicals, and industrial products as potential beneficiaries. 5. Softer commodity prices may provide relief as easing crude oil and industrial commodity prices could reduce input costs for businesses, support profit margins and help contain inflation. Lower energy prices could also boost household purchasing power and provide greater room for public investment, though the outlook remains dependent on geopolitical developments.
