Deven Choksey cautions that Indian mid-cap shares have surged ahead of fundamentals, advising investors to focus on quality large-cap stocks amid currency and portfolio rotation risks.
Domestic investors are still propping up India’s small- and mid-cap shares, but Deven Choksey has warned that prices in those pockets have run ahead of earnings and other fundamentals. The managing director of DR Choksey FinServ said investors should look for quality businesses that are available at neglected valuations, with large-cap stocks still offering the cleaner entry point in his view.
Choksey’s caution on mid-caps echoes a broader debate in the market. In a recent discussion with Business Today TV, he said large-caps remain the main guide for the market while mid-caps offer stronger growth potential, suggesting a portfolio split of about 70% in large-caps and 30% in quality mid-caps. UBS has also flagged Indian mid-cap valuations as stretched, even after some correction, and said domestic inflows have helped keep the segment elevated.
Currency weakness is another concern. Choksey said the rupee needs to steady and move back towards ₹91 to the dollar to reduce pressure on equities, adding that some of the damage has already been absorbed but further weakness could still hurt sentiment. That risk comes alongside portfolio rotation, as mutual funds and other investors shift out of expensive momentum names and into cheaper quality stocks, a change that has added to volatility in recent months.
Even so, Choksey remains constructive on banking shares. He pointed to reasonable valuations, improving credit growth and better-than-expected earnings, saying stronger business activity and longer working-capital cycles are boosting loan demand. Retail consumption is also holding up, he said, which supports large non-bank lenders and private banks with substantial consumer exposure.
He was also relatively upbeat on Life Insurance Corporation of India, arguing that the market has already priced in much of the downside. But he flagged continued share supply as an obstacle to a faster rerating. Overall, his message was one of selectivity: favour large-cap names with sound fundamentals and avoid chasing richly priced small- and mid-cap stocks simply because they have been popular.
Disclaimer: This article is intended to inform and educate, not to recommend or endorse any financial product, investment or strategy. Please consider your own financial circumstances and seek professional advice where appropriate before making financial decisions.
