Archive · 10 Aug 2026
Rajeev Thakkar: Market cap alone shouldn't decide stock investments
Imagine two groups of piggy banks.
One group is full of big companies, and another group has small companies.
Right now, people are paying a lot more money for the small piggy banks even though they are much smaller.
A smart money manager named Rajeev Thakkar said just because a piggy bank is small doesn't mean it will always give you more coins.
He explained that his company looks at each investment on its own, not just at how big or small the company is.
He also said the Indian stock market has been quiet for two years, which actually gives his team more chances to find good deals.
He thinks worries that computers will take away too many jobs are mostly exaggerated.
His company still owns small and medium-sized companies, but only when they seem like a good deal.
The big idea is: don't pick an investment just because of its size — look at what it's really worth.
PPFAS CIO Rajeev Thakkar said the fund house picks stocks based on individual risk-reward, not market-cap labels.
As of August 4, 2026, the Nifty Smallcap 250 traded at 34.6 times earnings versus 20.8 for the Nifty 100 and 30.7 for the Nifty Midcap 150.
Small caps carried roughly a 66% valuation premium over large caps and about 13% over midcaps, prompting Thakkar to question the assumption that smaller stocks always deliver higher returns.
After two years of muted market performance, PPFAS says opportunities are increasing and cut cash in the Parag Parikh Flexi Cap Fund from a peak of about 25% to around 14%-15%.
Thakkar called AI-related employment fears 'largely overblown at the aggregate level,' views the IT services sell-off as an opportunity, and said there is no change to PPFAS's basket of four private-sector banks.
Indian Energy Exchange remains a small position of less than 1% of the portfolio, with PPFAS to revisit its thesis as market-coupling developments emerge.
- Who
- Rajeev Thakkar, Chief Investment Officer and Director at Parag Parikh Financial Advisory Services (PPFAS), writing in a note to unitholders.
- What
- Explained the wide valuation gap between Indian large, mid and small-cap stocks and said the fund house invests based on opportunity and risk-reward rather than market-cap category.
- When
- August 4, 2026 (date of the note), following about two years of muted Indian equity-market performance.
- Where
- Indian equity markets.
- Why
- Because mid and small-cap indices trade at significantly higher earnings multiples than large caps, making stock selection and individual valuation more important than size alone.
Smaller always means better returns
Valuation and risk-reward matter more
Do smaller companies always deliver higher returns?
Smaller always means better returns
Some investors treat it as a law that smaller companies deliver higher returns, so paying a premium for small caps is automatically justified.
Valuation and risk-reward matter more
Thakkar argues market cap alone should not decide investments; each stock must be judged on its own valuation, earnings potential and risk-reward, pointing to US markets as a counterexample.
Is the small-cap valuation premium worth it?
Smaller always means better returns
Small caps' higher earnings multiples (34.6x) reflect their growth potential and are acceptable for companies with strong prospects.
Valuation and risk-reward matter more
PPFAS believes such a large premium (about 66% over large caps) must be weighed against individual company risks and rewards rather than accepted simply because the company is small.
- Nifty 100 P/E ratio
- 20.8
- Nifty Midcap 150 P/E ratio
- 30.7
- Nifty Smallcap 250 P/E ratio
- 34.6
- Note author
- Rajeev Thakkar, CIO and Director, PPFAS
- Note date
- August 4, 2026
- Flexi Cap Fund cash level
- Fallen from a peak of about 25% to around 14%-15%
- Indian Energy Exchange position
- Less than 1% of portfolio
- Valuation data source
- Screener.in