As markets consolidate after a heady rally, fund managers are turning cautious on the frothy mid- and small-cap segments. At Moneycontrol’s Mutual Fund Summit 2025 – Bengaluru Edition, top market voices agreed that while India’s structural story remains intact, valuations are demanding greater discipline and the next phase of alpha may come from large caps.
Anish Tawakley, Co-CIO (Equity), ICICI Prudential AMC, said the market’s recent consolidation was natural after two years of strong earnings and re-rating. “The economy has lost a bit of momentum, but it’s not a structural issue. Expectations had simply run too high,” he said. “I would prefer large caps now. There’s a lot of froth in small and mid caps, companies with weak business models are being valued like hidden gems. This is the time to move allocations toward large caps with visibility and balance-sheet strength.”
Harsha Upadhyaya, CIO, Kotak Mahindra AMC, echoed the view, pointing out that large caps currently offer better risk-reward.
“Large caps today provide both stability and relative value. They may not be cheap, but they’re not expensive either,” he said. “After a period of underperformance versus mid and small caps, large caps are poised for a catch-up trade. The safety and liquidity they offer make them a natural choice in this phase of the cycle.”
But Deepak Shenoy, CEO, Capitalmind AMC, questioned the market’s obsession with size classifications altogether. “The categorisation itself is flawed,” he said. “When SEBI defined small caps seven years ago, the largest small cap was about Rs 7,000 crore. Today, it’s over Rs 36,000 crore. You could have gone up five times and still be called a small cap.”
Shenoy argued that alpha can exist across the market spectrum, depending on where investors look. “Even large caps can deliver strong returns. In the US, it’s the largest companies — the Magnificent Seven — that dominate market gains. India could see a similar trend,” he said. Still, he urged balance.
“Some small and mid caps will do well, but not all. The idea is not to chase performance — it’s to identify sustainable businesses and hold them patiently.”
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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