Prefer largecaps over midcaps; Aurobindo, Axis top picks: Citi

Midcaps continue to do well, outperforming the market by nearly 15 percent over the past year, says Surendra Goyal of Citi, adding while domestic fund flows have indeed helped, even FII ownership continues to rise in midcaps.

Bottom-up opportunities always exist in midcaps, but valuations on aggregate are getting expensive, with the one-year forward P/E close to that for large-caps, he feels.

With valuations converging and return on equity differential still wide, large caps appear better placed in the near term, Goyal says.

Citi India's top large cap picks are Aurobindo Pharma, Axis Bank, HDFC Bank, M&M and L&T.