Nifty megacaps are going nowhere. Why Samco CIO Umesh Mehta put 75% of his flexicap fund beyond largecaps
Mutual Fund CIO Umesh Mehta says Nifty mega caps may remain subdued as institutional ownership limits fresh buying and earnings momentum shifts towards mid- and small-cap stocks. He explains why Samco Flexicap Fund has allocated 70–75% of its portfolio beyond large caps, while highlighting opportunities in defence, power, AI ancillaries and gold, and warning about IPO-led liquidity pressures.
The headline stocks on Dalal Street may dominate portfolios, yet they are no longer driving returns. Nifty's mega caps are reportedly "languishing" due to widespread institutional ownership limiting incremental buyers, even though growth and earnings momentum is shifting towards smaller market caps.
Umesh Mehta, CIO of Samco Mutual Fund, has taken a notably aggressive stance in his Flexicap fund, allocating roughly 70-75% of the portfolio to mid caps, small caps and select micro caps, while maintaining limited large-cap exposure. While mega caps can provide downside protection, Mehta believes growth-oriented investors must take calculated risks beyond the headline indices.
Over the past two years, the Nifty 50 has delivered little at the index level, despite sector-specific activity continuing, particularly in mid- and small-cap stocks. Mehta attributes this to the fact that traditional businesses constitute a significant portion of the indices, leading to lower valuations for these companies.
Although smaller pockets of the market are moving, the majority of large and mega caps are underperforming. Some sectors, like refining and defense, are seeing strong earnings tailwinds due to geopolitical factors. Investors must conduct a bottom-up analysis, focusing on individual stocks rather than solely relying on headline indices.
Even if incremental buyers emerge for mega-cap stocks, there may also be incremental sellers, meaning few net new buyers. Additionally, the market offers various risk-reward opportunities, with large mega caps providing downside protection and growth-seeking investors needing to take calculated risks in growth companies.
Flexicap funds typically exhibit a strong large-cap bias, but Samco's fund is positioned differently, with 70-75% of the portfolio tilted towards small caps, mid caps and micro caps. Mehta sees opportunities in these areas due to active market momentum, while large caps have largely failed to generate the returns investors expected in recent years.
Written by urgent.news from The Economic Times - Top News's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
