Archive · 4 Sep 2026
Large-Caps Look More Attractive, But Valuation Risks Remain
Large companies in the stock market have become less expensive compared with their own past prices.
R. Sivakumar of Axis Mutual Fund says this may give investors a better entry point.
He also warns that large companies are not cheap by every measure.
Banks could be one promising area because lending growth has improved and loan quality is clean.
Smaller and medium-sized companies involved in manufacturing and exports may also grow.
A weaker rupee and new trade agreements could help exporters.
However, these smaller companies already have high price-to-earnings valuations.
Investors therefore need to check whether their expected growth is realistic.
Large-cap stocks are trading more than one standard deviation below their long-term valuation averages.
Axis Mutual Fund’s R. Sivakumar says large-caps are relatively attractive, though not cheap in absolute terms.
Banks may benefit from stronger credit growth, clean asset quality and possible margin improvement.
Export-oriented manufacturing could support mid- and small-cap opportunities as India expands its global goods exports.
Mid- and small-caps offer stronger growth but trade above long-term valuation averages, requiring careful stock selection.
- Who
- R. Sivakumar, chief investment officer at Axis Mutual Fund, and investors in Indian equities.
- What
- An assessment that large-cap stocks have become relatively more attractive after a valuation correction, while mid- and small-caps offer growth but carry valuation risk.
- Where
- India’s equity market.
- Why
- Large-cap valuations have moved below their long-term averages, while improving credit growth, export opportunities and private-sector capital expenditure may support selected companies.
Relative Attractiveness
Valuation Caution
Large-cap investment case
Relative Attractiveness
Large-caps are trading below their long-term valuation averages, giving investors a more reasonable entry point.
Valuation Caution
They are not cheap in absolute terms, so the correction does not eliminate valuation concerns.
Mid- and small-cap opportunity
Relative Attractiveness
Manufacturing, exports and faster earnings growth could justify higher valuations in selected mid- and small-cap companies.
Valuation Caution
The segments trade above long-term valuation averages, and investors should be cautious where expectations exceed fundamentals.
- Large-cap valuation
- Trading more than one standard deviation below long-term averages.
- Absolute valuation
- Sivakumar stressed that large-caps are not cheap in absolute terms.
- Bank credit growth
- System credit growth increased from about 10% a year earlier to 16–18%.
- Bank asset quality
- Asset quality was described as clean.
- Manufacturing exports
- India accounts for less than 2% of global manufactured-goods exports.
- Mid- and small-cap valuation
- These segments are trading about one standard deviation above long-term averages.
- Private capital expenditure
- Private-sector capital expenditure has revived, although weaker infrastructure spending reduces aggregate capex figures.