During bouts of heightened volatility, experts often advise investment in safer havens like large-caps as against the more volatile small-cap or mid-cap segment and the latest market poll by Moneycontrol corroborates the view.
The findings of the Moneycontrol market poll of experts reveal that 76 percent of respondents currently favour large-cap stocks with only 24 percent considering investments in small- or mid-cap stocks.
This assumes significance as the findings also indicate that a large majority of experts view Indian markets as “expensive” at current levels, with expectations of a potential correction of up to 10 percent – with some predicting a fall of as much as 20 percent -- even as the Sensex and Nifty have already declined nearly five percent from their peaks.
Kranthi Bathini, Director of Equity Strategy at WealthMills Securities, is of the view that the recent correction in Indian equities has made the valuations of large-cap stocks more appealing.
He emphasised that large-cap stocks offer investors greater stability and a margin of safety, which is particularly valuable in volatile market conditions. As a result, investors tend to favour large-cap stocks over mid- and small-cap stocks in such environments.
However, Bathini also pointed out that selective opportunities do exist in mid- and small-cap segments though they require a more cautious approach due to their higher beta and stock-specific risks.
Both benchmark Sensex and Nifty fell over 4.5 percent each since September 26 while broader indices BSE MidCap and BSE SmallCap lost over 2.7 percent and 1.8 percent respectively.
Nirav Karkera, Head of Research, Fisdom said large-cap stocks currently hold a more favourable position compared to their mid- and small-cap counterparts. This is partly due to concerns surrounding the China 1 strategy, which is now being questioned after China's recent stimulus measures.
There are fears that a sustained recovery in the Chinese economy could lead to some operations relocating back to China from India. Amid these uncertainties, high-quality stocks -- predominantly found in the large-cap segment -- are expected to remain attractive in the Indian market.
Additionally, ongoing geopolitical tensions in the Middle East region have raised concerns for riskier assets like Indian equities, not just from the perspective of oil prices but also in terms of trade dynamics and foreign inflows.
Given these factors, investors may prioritise liquidity, which large-cap stocks offer more readily. Overall, the combination of valuation advantages, economic shifts, and liquidity considerations strengthens the case for large-cap stocks in the current environment, said Karkera.
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