India’s large-cap stocks are emerging as relatively attractive investment options compared with mid- and small-cap shares, with potential opportunities appearing in select companies among the top 100 by market capitalisation, according to a report by Omniscience Capital.
The report, released on Thursday, highlighted opportunities in sectors including banks, infrastructure-focused NBFCs, power and energy transition. It also noted that sustained investment flows into small-, mid- and multi-cap funds, along with continued selling in large-cap schemes, have raised concerns about the concentration of equity inflows in segments where valuations remain elevated.
Select Large-Cap Sectors Show Potential
According to the report, certain pockets of the large-cap market are currently mispriced and could offer opportunities over the next three to five years.
“Opportunities for long-term investing are emerging in mispriced pockets of the top 100 companies, which could potentially deliver better performance over the next three to five years,” said Ashwini Shami, President and Chief Portfolio Manager at Omniscience Capital.
The report said banks, infrastructure NBFCs, housing finance companies (HFCs), power companies, selected energy-transition stocks, business services, EPC firms and certain infrastructure companies have a favourable growth outlook ahead of the festive season while trading at relatively more attractive valuations.
Meanwhile, the small-cap index is considered fully priced, although the report said detailed bottom-up stock selection could still identify individual opportunities across a universe of nearly 1,000 companies.
US Inflation and Interest Rates Remain Key Factors
The report also pointed to persistent inflation in the US, which has remained above 3 per cent. It said the US-Iran conflict has added further upward pressure, contributing to expectations around interest rates.
As a result, the yield on the US 10-year Treasury climbed to 5 per cent, reaching levels close to a 19-year high last seen in July 2007.
The report said another Federal Reserve rate increase could take place before the end of the year, potentially at the December meeting.
In India, elevated crude oil prices and a weaker rupee are continuing to contribute to inflationary pressures, increasing the possibility of an RBI rate hike at its next meeting, according to the report.
FII Flows Remain Uneven
Foreign institutional investor (FII) activity has also remained mixed. While FIIs became net buyers during July and August 2026, the report noted that the value of their purchases was considerably lower than the selling recorded during the previous four months.
“While FIIs turned net buyers in the months of July and August 2026, the quantum of net buying was significantly lower than the net selling observed over the preceding four months,” the report said.
FIIs returned as net sellers in September as US Treasury yields increased by 20-30 basis points over the previous two weeks. At the same time, continued withdrawals from large-cap mutual fund schemes have offset the recent buying activity from foreign investors.
Disclaimer
This article is based on information and views presented in the Omniscience Capital report and is intended for general informational purposes only. It should not be considered investment advice or a recommendation to buy or sell any security. Market conditions, valuations and investor flows can change, and readers should conduct their own research or consult a qualified financial adviser before making investment decisions.