Sunil Sharma, Chief Investment Strategist, Ambit Global Private Client
For Sunil Sharma, 2025 has been a year of sharp divergence across the market. Largecap investors are up 11% year-to-date, supported by improving fundamentals and earnings visibility. Nifty’s earnings are up 15.3% year-on-year, with revisions turning positive after November results, reinforcing Sharma’s view that large caps are entering 2026 from a position of strength.
He argues that midcaps are also holding up better than the headline returns suggest. After delivering 44.6% in 2023 and 24.5% in 2024, midcaps could still manage a 5-6% gain in 2025. With a forward valuation of around 27.8 times and earnings growth and upside of over 20%, Sharma believes fundamentals will dominate returns next year.
However, smallcaps are lagging behind. With smallcaps returning -7% and microcaps -19%, Sharma is wary of index-based exposure. Earnings growth and reforms have been weak, threatening broad participation. His forecast for 2026 is that investors should make selective, bottom-up investments by experienced fund managers. Across market caps, he expects active management to outperform passive strategies, as stock and sector dispersion widens.
V Srivats, Executive Vice President and Fund Manager, UTI AMC
V Srivats strikes a more cautious but balanced tone. He sees an improvement in the earnings outlook for both midcaps and smallcaps, which should help stabilize returns after a difficult year. However, valuation remains a major hurdle.
Mid- and smallcap indices continue to trade at a premium to largecaps, and Srivats expects this difference to remain significant in 2026. According to him, given their valuation comfort and more predictable earnings, large caps are better placed to ride the recovery. While small stocks may recover, leadership is likely to stay with companies that offer scale, balance-sheet strength and earnings visibility.
Nilesh Shah, Managing Director, Kotak Mahindra AMC
For Nilesh Shah, risk in smallcaps has not completely disappeared. While the sharp excesses of previous years have eased, Shah believes froth still exists in select counters, where valuations assume earnings growth that may not materialize.
A deeper concern, he says, lies in the ownership structure. Many smallcap stocks have limited free float, with shares concentrated in a few hands. This concentration has helped drive valuations higher, but it also creates fragility.
Dinsha Irani, CEO, Helios Mutual Fund
Dinsha offers a more constructive view on the Iranian point of view. He believes that India’s midcap and smallcap segments are starting to look attractive again, especially on a growth-adjusted basis. According to Irani, the earnings downtrend that started around September last year seems to have bottomed out by mid-2024.
The sharp recovery in mid- and smallcap earnings during the September quarter surprised him the most, with sentiment remaining weak and comparisons favorable. Irani argues that this resilience suggests that fundamentals are improving beneath the surface. While risks remain, he sees selective opportunities emerging as earnings pick up again.
Trideep Bhattacharya, Fund Manager, Edelweiss AMC
By Trideep Bhattacharya Evaluation is discipline central. He notes that largecap valuations have cooled to around 20.5 times their 10-year average one-year forward earnings, making them relatively attractive.
Smallcaps and midcaps, in contrast, remain expensive by historical standards. Smallcaps trade at around 25.1 times forward earnings, higher than their long-term average of 16.7 times, while midcaps trade at 29.2 times, compared to the historical norm of 23.1 times. Bhattacharya says the worst of the froth is over, but stresses that the segment is still not cheap and investors should not mistake the correction for value.
(Disclaimer: Recommendations, suggestions, opinions and views given by experts are their own. These do not represent the views of Economic Times.)
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