The mid and smallcap space could catch a breath after the assembly poll results, according to Jefferies' India Strategist Mahesh Nandurkar, who said large caps still have some steam left.
"Large caps have some upside, especially because we've seen large foreign investors selling for the past few months," Nandurkar said in a conversation with CNBC-TV18.
"From here on, midcaps and small caps might take a breather as domestic retail activity in these segments is at a fairly elevated level," Nandurkar said. According to Jefferies, the domestic investors might even see some unwinding in the near term.
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Nandurkar is of the view that the stock market has experienced a significant run-up ahead of the election outcome. "The only segment of investors not well-positioned in the Indian markets are the FIIs. However, there is a good chance they might come back, likely more on the largecap side," Nandurkar added.
He said that mid and smallcap traders might need to prepare for a flattish stock market. "In the near term, we've already seen a lot of investor positioning, especially from domestic retail investors," Nandurkar said. He mentioned that in the last 4-5 months, total domestic buying in equity markets is roughly about $7 billion a month, which is a staggering figure. "It's up nearly three times from a year-on-year perspective," Nandurkar added.
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On earnings growth, Nandurkar said, "for FY25 and FY26, we are looking at broader corporate earnings growth to be around 12-13 percent. The domestic-facing cyclicals such as industrials, manufacturing, infrastructure and banks are likely to see higher earnings growth in the range of 16-17 percent. Outward-facing sectors such as IT will see less growth in comparison."
Nandurkar added that the stock market is pricing in growth for the longer term. The next few days following the election outcome - along with any new policy measure - could offer some more guidance to investors.
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