Return of the Large Caps? - We Stay Selective

Research evidence excerpt

Return of the Large Caps? - We Stay Selective

India | Equity Strategy EquityJulyResearch9, 2026

STRATEGY NOTEReturn of the Large Caps? - We Stay Selective

Mega caps dominate global equity markets but in India it's exactly the

opposite. In India, SMID-caps have stolen the thunder driven by strong EPS Exhibit 1 - Top 20 stocks as % of total market

(18% vs 8%) growth. Technical factor being FPI selling (large caps) and cap (India vs global)

Top 20 stocks as % of total mcap

60% (Global) 25%domestic buying (smid caps). While a broadbased reversal of this multi-

year trend is unlikely, the EPS gap is now closing. Banks /lenders is the 50%40% 20%15%

10%best way to play the potential mean-reversion trade, helped by EPS growth 30%20% (India)

5% 10%acceleration.

0% 0%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

The Great Divergence. The global trend of market cap concentration in few large caps (Top-20 .Source: Bloomberg,Top 20 stocks as % ofJefferiesIndia mcap Top 20 stocks as % of world mcap (RHS)

stocks 24% of total market cap - all-time high) has escaped the Indian markets over the past

three years. The global stock concentration has been driven by AI-related themes and the India

Exhibit 2 - Nifty 100 (Largecaps) vs Nifty

large caps have lacked themes. At 28%, the share of Indian market cap held by Top-20 stocks Midcap 150 Index eps growth

(%) Earnings growthis the lowest since 2000. Lower by 16ppt since 2020. This also shows that India is more of 25

gap expected to 20 narrow 20 18a bottom-up market with less concentrated themes. The composition of the India's Top 20

companies has changed meaningfully over time with many commodity companies dominating 15 14