Mid, smallcap stocks to drive the next earnings cycle, says Motilal Oswal's Ajay Khandelwal

Motilal Oswal's Ajay Khandelwal

• Growth shifting to mid- and small-cap firms beyond Nifty 50
• Earnings growth expected at 12% with stable margins
• Motilal Oswal AMC remains bullish on IT stocks despite volatility

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India’s earnings and investment cycle is gradually broadening, with the next phase of growth likely to come from mid- and small-cap companies rather than just the Nifty 50 heavyweights, said Ajay Khandelwal, Fund Manager at Motilal Oswal AMC on the sidelines of the Moneycontrol's Mutual Fund Summit 2026 – Ahmedabad Edition.

Khandelwal said earnings expectations remain realistic. “We are starting this year with around 12% earnings growth assumptions. The base is right, deleveraging has happened, and margins have stabilized after commodity volatility,” he said.

He pointed out that unlike the previous cycle, where capacity expansion was concentrated in capital-intensive sectors such as cement, power and roads, the current cycle is being led by more capital-light and scalable businesses. “Capital intensity has come down, which is why structural multiples have gone up,” he said.

Explaining why growth is shifting beyond the Nifty 50, Khandelwal said the contribution of Nifty companies to India’s overall profit pool has steadily declined.

“Fifteen years ago, Nifty 50 companies contributed nearly 65% of profits. Today, that number is closer to 55%. Profit growth is clearly coming from beyond the Nifty,” he said, pointing to consumer, industrial and manufacturing companies driving this shift.

On volatility, Khandelwal dismissed the idea that sharp stock moves are limited to small-caps. “Even large-caps are seeing steep corrections when earnings disappoint. Volatility is across segments,” he said.

Sharing his contrarian calls, Khandelwal said Motilal Oswal AMC continues to remain constructive on IT stocks despite recent underperformance. “We are bullish on IT. AI adoption is still in early stages, but things are changing very fast,” he added.

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