'Large-caps to benefit first once FIIs come back'

Large-cap stocks offer a greater margin of safety for both valuations and earnings, compared to midand small-caps.

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And financials and consumer discretionary sectors are the key beneficiaries of the ongoing consumption recovery. Saurabh Jain, managing director and head, Wealth Solutions and Affluent Segments, Standard Chartered, India, tells Saikat Neogi investors should consider high quality corporate bonds given attractive credit spreads.Are large-caps better positioned for higher returns?

Investors should see a more favourable environment for Indian equities in 2026. Consensus expects Nifty Index EPS CAGR to rise to 16% for FY26-28, compared to 5% for FY24-26 as the yearlong earnings downgrade cycle bottoms out. An uptick in consumption demand amid GST cuts and strong rural demand are likely to drive the corporate profit cycle in the coming year. Historically, equities have delivered strong double-digit returns post the end of the easing cycle as lagged transmission of lower rates helps propel growth and earnings. For foundation equity allocation, we are overweight on large-caps as they offer a greater margin of safety for both valuations and earnings, compared to midand smallcaps. In addition, large-caps would be the first beneficiaries of a resumption of foreign investor inflows and higher equity allocation in hybrid strategies.

Which sectors are expected to perform well this year?