After a period of exuberant rallies in the mid- and small-cap segments, market experts are now advocating for a strategic shift toward large-cap stocks. During the Moneycontrol Mutual Fund Summit 2025 held in Bengaluru, prominent fund managers expressed concerns about the current market valuations, suggesting that the next phase of alpha generation is likely to come from larger companies. Anish Tawakley, Co-CIO of ICICI Prudential AMC, highlighted that the recent market consolidation, following two years of robust earnings and re-ratings, was a natural development. He emphasized that while the Indian economy has lost some momentum, this does not signify a structural issue, but rather a correction in overly optimistic expectations.

Echoing this sentiment, Harsha Upadhyaya, CIO of Kotak Mahindra AMC, pointed out that large caps currently present a favorable risk-reward balance. He noted that while large caps may not be cheap, they are not excessively priced either, making them an attractive option for investors looking for stability and liquidity in the current market environment. With large caps having underperformed against their mid and small-cap counterparts, Upadhyaya believes they are now set for a catch-up trade as investors seek safety amid market volatility.

However, Deepak Shenoy, CEO of Capitalmind AMC, offered a contrarian view, arguing against the rigid categorization of stocks by size. He noted that the definition of small caps has evolved dramatically over the years, suggesting that alpha opportunities exist across the entire market spectrum. Shenoy pointed to successful large-cap stocks in the US, such as the "Magnificent Seven," as exemplars of potential high returns, urging investors to focus on identifying sustainable businesses rather than merely chasing performance. With some small and mid caps likely to perform well, he warned against overgeneralizing; the key is to be discerning in selecting investments that promise long-term growth.