'Froth over in large-cap stocks, small-caps still stretched'

Harsha Upadhyaya, chief investment officer, Kotak Mahindra Asset Management Company, believes the Indian stock market is in a healthier place than it was a year ago.

- HARSHA UPADHYAYA, CHIEF INVESTMENT OFFICER, KOTAK MAHINDRA AMC

He tells Mahesh Nayak that froth in large-caps has eased and valuations in mid-caps look more balanced. However, smallcaps remain stretched. Excerpts:

How do you read the current market setup?

On the domestic side, most indicators are supportive of growth. We have had 125 basis points (bps) of rate cuts, a fairly predictable policy environment, and corporate earnings that appear to be bottoming out. Large-cap valuations have corrected meaningfully, which means much of the earlier froth has been taken out of the system. Add to that strong monsoons, controlled inflation, and the GST rejig that’s boosting consumption, and the fundamentals look stable. The volatility we’re seeing is essentially being imported from outside India — tariffs, geopolitical tensions, and global rate concerns. Once those uncertainties subside, I expect market conditions to strengthen further. Compared to where we were last year, I feel more positive today.

What is your view on the broader market — midand small-caps?