Large-cap shares underperform amid persistent foreign selling and a shift in domestic investor preferences towards small and mid-cap stocks, supported by stronger earnings and sectoral opportunities, according to Ramesh Mantri.
Large-cap shares have lagged the wider market because foreign investors have kept selling and domestic money has rotated elsewhere, according to Ramesh Mantri in a Business Standard interview. He said overseas funds tend to have heavier exposure to the biggest names, so persistent outflows have hit that segment harder, while local investors have increasingly favoured small and mid-cap funds. He also pointed to weaker earnings in parts of the large-cap universe, especially information technology services, where uncertainty around artificial intelligence has weighed on growth.
Mantri said the recent run-up in small and mid-cap shares still has room to continue, even if some rebalancing eventually becomes necessary. The difference this cycle, he argued, is that stronger profits are backing the higher valuations. Business Standard reported in April that flexicap funds overtook small and mid-cap products as the most popular category in financial year 2025-26, even as smaller company funds still attracted sizeable inflows and multi-asset strategies gained from exposure to gold and silver.
That backdrop fits with broader fund-flow data. Equity mutual fund inflows rose sharply in June 2026, according to figures released by the Association of Mutual Funds in India and reported by WebIndia123, with mid-cap funds again drawing the most money, followed by small-cap and large-cap schemes. The pattern suggests investors have not abandoned risk entirely, but are still spreading capital across market sizes rather than concentrating only in index heavyweights.
On sectors, Mantri said the most attractive combinations of growth and valuation currently appear in banking and financial services, consumer stocks, pharma and healthcare, new manufacturing and the power-equipment supply chain. He said consumer shares, taken as a broad basket including retail, travel, autos and fast-moving consumer goods, now trade near multi-year valuation lows even as growth has improved. He was more cautious on large-cap IT, while describing energy, oil, gas, metals and real estate as harder to assess or less appealing on fundamentals.
He also rejected the idea that a surge in initial public offerings permanently drains liquidity from the rest of the market. Capital, he said, is eventually recycled through private equity, venture capital and public markets, and allowing exits can support future investment. Business Standard said his portfolios are deliberately diversified, reflecting a preference for balancing opportunities across sectors rather than making a single big bet on one part of the market.
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