Archive · 22 Sep 2026
'Mid- and Small-Cap Stocks Look Pricey,' Kotak Analyst Warns
Sanjeev Prasad thinks some big companies on the stock market are now fairly priced.
However, many smaller and medium-sized companies have become very expensive.
He says investors should be careful because some prices are based mainly on stories about future growth.
India’s economy is still showing strength through investment, spending and exports.
Companies are also expected to earn more money this year.
Foreign investors may prefer other countries because their expected earnings growth is higher.
Higher oil prices and interest rates could hurt markets.
Prasad believes investors should watch these risks closely.
Sanjeev Prasad says many large-cap stocks have become more reasonably valued after price and time corrections.
He considers several mid- and small-cap stocks expensive, particularly in capital goods, defence and CDMO sectors.
Nifty earnings are expected to grow 17-17.5%, while Kotak’s 320-company universe could grow 15%, or 27% excluding OMCs and Coal India Limited.
Market resilience is being supported by private-sector capital expenditure, strong industrial credit growth, steady consumption and services exports.
Key risks include prolonged high oil prices, inflation, developed-market fiscal stress, higher interest rates and potential tariffs on Russian oil.
- Who
- Sanjeev Prasad, Managing Director and co-Head of Kotak Institutional Equities, discussing Indian equities.
- What
- He assessed market valuations, earnings prospects, investment momentum and risks to equities.
- When
- The interview discusses current conditions and forecasts for FY27, including the June quarter of 2026.
- Where
- India and its financial markets, with comparisons to the United States, Korea and Taiwan.
- Why
- Markets have remained resilient because of investment, consumption and exports, but valuations and macroeconomic risks remain concerns.
- Large-cap valuation
- Financial services, healthcare, pharma and telecom stocks were described as inexpensive to attractively valued in many cases.
- Mid- and small-cap valuation
- Some stocks were described as expensive based on narratives, with high valuations in mid-cap capital goods, defence and CDMO companies.
- Nifty earnings forecast
- Expected to grow 17-17.5% this year, following 8% net-profit growth in FY26.
- Kotak company universe
- Earnings growth is forecast at 15% for 320 companies, rising to as much as 27% excluding OMCs and Coal India Limited.
- Industrial credit growth
- Credit growth to industry was reported at more than 20%.
- Services exports
- Non-software services exports reached $25 billion in the June 2026 quarter, compared with $18 billion in the June 2025 quarter.
- Main equity risks
- Higher-for-longer oil prices, inflation, developed-economy fiscal stress, rising yields, another possible US Federal Reserve rate hike and potential tariffs.