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DSP Says Large-Caps Offer Better Value After Recent Divergence
Different kinds of company shares have performed differently over the past year.
Small- and mid-sized companies’ shares did better than large companies’ shares.
But DSP Mutual Fund says many smaller-company shares now cost a lot compared with their earnings.
It says large-company shares have fallen enough to look more reasonably priced.
The report thinks large companies may offer investors a bigger safety cushion at this point.
It also warns that smaller-company shares may need very strong business results to keep doing so well.
Investors do not necessarily need to sell all their mid- or small-cap funds.
People investing for a long time can keep investing regularly, but should check whether their portfolio has become too concentrated in recent winners.
Over the past year, large-cap funds averaged -4.76%, while mid-cap funds returned 2.87% and small-cap funds 8.02%.
A DSP Mutual Fund report says large caps have corrected toward fair or cheap valuations, while mid- and small-caps remain relatively expensive.
At the end of September 2026, the Nifty 100 traded at 19.3 times earnings, about 12% below its five-year median of 22.0.
The Nifty Midcap 150 and Nifty Smallcap 250 traded at 27.6 and 33 times earnings, respectively.
DSP advises investors to review any portfolio heavily tilted toward recent outperformers, while saying long-term investors need not abruptly exit mid- or small-cap funds.
- Who
- DSP Mutual Fund and investors in equity mutual funds.
- What
- DSP’s October 2026 report says large-cap funds may offer relatively better value and urges investors to review their allocations.
- Where
- Indian equity markets.
- When
- The report is dated October 2026 and cites valuation data from the end of September 2026.
- Why
- DSP says large-cap valuations have fallen nearer to fair or cheap levels, while mid- and small-cap valuations remain elevated.
Shift focus toward large-caps
Maintain long-term mid- and small-cap investing
How to respond to valuations
Shift focus toward large-caps
DSP says large caps have corrected toward fair or cheap valuation zones, while mid- and small-caps remain elevated and need stronger earnings to justify broad exposure.
Maintain long-term mid- and small-cap investing
The report does not call for an abrupt exit from mid- or small-cap funds; investors with long horizons can continue their systematic investment plans.
Interpreting recent outperformance
Shift focus toward large-caps
DSP says mid- and small-caps’ large relative gains could be vulnerable in a downcycle, when those segments have historically lost almost all upcycle alpha.
Maintain long-term mid- and small-cap investing
The article reports that mid- and small-cap funds outperformed large-cap funds over the past year, while noting that long-term investors may remain invested after reviewing their allocations.
Key facts
- Large-cap fund average return
- -4.76% over the past year
- Mid-cap fund average return
- 2.87% over the past year
- Small-cap fund average return
- 8.02% over the past year
- Nifty 100 trailing P/E
- 19.3 at the end of September 2026, versus a five-year median of 22.0
- Nifty Midcap 150 P/E
- 27.6
- Nifty Smallcap 250 P/E
- 33
- DSP’s investor guidance
- Prioritise margin of safety and review allocations; long-term investors need not abruptly exit mid- or small-cap funds.
Quotes
DSP Mutual Fund
Mutual fund company whose Netra report is discussed in the article.
“Large caps have corrected enough for valuations to be near fair/cheap zones. SMIDs (small-cap and mid-caps) have seen less valuation compression and still need stronger earnings delivery to justify broad exposure. Large-caps may offer more opportunities at this time.”
livemint.com
“SMIDs now need extraordinary fundamentals to sustain extraordinary relative returns.”
livemint.com
Sources
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