Why investors should not ignore largecaps despite the smallcap rush: Canara Robeco CIO Shridatta Bhandwaldar
We are looking at the next 12-18 months from a two perspective, corporate earnings growth and impact of geopolitics through higher energy prices on the Indian market. From the corporate earnings perspective we are fairly constructive. After 1.5 years of earnings downcycle, the earnings cycle has been reviving from 2HFY26.
Investors focused on small- and mid-cap stocks may be missing out on the potential of large-cap stocks, according to Shridatta Bhandwaldar, chief investment officer-equities at Canara Robeco Asset Management Company. While large-cap stocks provide a greater safety margin, any significant valuation improvement will likely require strong earnings growth in key sectors.
Bhandwaldar remains optimistic about equities, citing a 15% earnings growth in the Nifty 500 Index for the first quarter of FY27, marking a recovery from an 18-month earnings decline.
From a risk-reward standpoint, Bhandwaldar anticipates a period of corporate earnings growth and the impact of geopolitical factors on energy prices over the next 12-18 months. While geopolitical risks pose a challenge, the economy's strong macroeconomic position suggests limited macro and micro challenges. However, sustained high energy prices could strain macros and lead to earnings downgrades for FY27E and FY28E.
Bhandwaldar's base case assumes energy prices remain below $90 per barrel on average, limiting earnings downgrades.
Large-cap stocks currently offer better value than mid-cap stocks, with opportunities across various sectors. Bhandwaldar identifies financials, automobile, consumer discretionary, quick commerce platforms, retail companies, hotels, telecom, aviation, pharma, manufacturing, and industrials as potential areas for value. The Canara Robeco Large and Mid Cap Fund has 46% of its portfolio in large caps, 40% in mid-caps, and 11% in small caps.
The fund's allocation strategy focuses on identifying companies with strong competitive positions, quality management, and balance sheet quality across all market caps.
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