Mid and small-caps look expensive: Should you rebalance your portfolio as earnings could lift equities from October? — SkimNews
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- Omniscience Capital warned that the Nifty Smallcap 250 trades at ~34x trailing P/E and the Nifty Midcap 150 at ~30x, versus ~20x for the Nifty 100, calling valuations 'overvalued' even as the broader market consolidates.
- Ashwin K. Shami, President & Chief Portfolio Manager at OmniScience Capital, said multi-year forward earnings execution is 'fully priced in,' leaving prospective returns 'barely near the discount rate' with 'severe de-rating risk.'
- Omniscience Capital expects Indian equities to re-rate as H2 FY27 earnings accelerate (October 2026 to March 2027) alongside a steady return of domestic institutional capital, framing consolidation as an accumulation window.
- The firm noted foreign investors have turned net buyers on multiple occasions after a two-year moderation in valuations, signaling renewed institutional interest.
- Preferred sectors include banking and financial services, infrastructure and power, and business services, supported by resilient credit growth, rising electricity demand and a recovery in corporate capex.
- Global headwinds flagged include US 10-year Treasury yields near 4.6%-4.7% one-year highs, the US Federal Reserve's September 16 policy decision as a near-term trigger, and crude oil prices up 20%-30% amid escalating Middle East tensions.
- FY27 real GDP growth is estimated at around 7%, supporting domestic fundamentals per the firm.
Why it matters: With the Nifty Smallcap 250 at a ~70% P/E premium to the Nifty 100, retail investors overweight in these segments face clear de-rating risk if H2 FY27 earnings (starting October 2026) fall short — making selective reallocation into high-quality businesses more prudent than chasing recent performance.
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