Nifty 50 correction: fund managers see value in large caps — SkimNews
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- Nifty 50 is down 13% over two years, 14.5% below its September 2024 peak, and fell 6.9% in September 2026, with large-cap mutual funds losing 5.7% on average that month.
- Foreign portfolio investors pulled ₹35,861 crore ($3.75 billion) from Indian equities in September, bringing two-year net selling close to $60 billion per National Securities Depository Limited data.
- Brent crude has surged roughly 68% in 2026 to $102/barrel — a major concern for Mirae Asset's Neelesh Surana and Nippon India's Shailesh Bhan, since India's oil import dependence widens the current account deficit and pressures the rupee.
- Large caps now trade at ~17x one-year forward earnings, about 11% below the 10-year average of 18.9x, while small caps remain at a ~20% valuation premium and mid caps hover near long-term averages, per Kotak Mahindra AMC's Harsha Upadhyaya; large caps posted 17.6% year-on-year earnings growth in the June quarter.
- IT stocks look attractive at 12–13x earnings with 7–8% earnings yields, with Bhan seeing a potential role for the sector as enterprises seek to extract value from AI spending.
- Insurance stocks corrected sharply after the Insurance Regulatory and Development Authority of India (IRDAI) released a 23 September consultation paper proposing steep cuts to distribution commissions and caps on management expenses.
- Fund managers including Bhan and adviser Surya Bhatia advise against cutting equity exposure and recommend gradual additions — Bhan characterized the current setup as 'bad news and good prices.'
Why it matters: Indian equity investors have endured two years of flat-to-negative returns, but the correction has pushed large-cap valuations 11% below their 10-year average while large-cap earnings grew 17.6% year-on-year in the June quarter — fund managers now call the setup 'bad news and good prices' and recommend gradual additions. The $3.75 billion in September FPI outflows signals that foreign investors remain cautious over $102 crude and rising global yields, leaving domestic flows to do the heavy lifting.
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