Look beyond small caps: Mispriced opportunities emerge in top 100 stocks | Personal Finance
Investors who have been chasing mid- and small-cap stocks may need to look higher up the market-cap ladder for their next set of opportunities, according to Omniscience Capital. The fund house sees pockets of mispricing among India’s top 100 companies, even as valuations in parts of the broader small- and mid-cap universe remain elevated.
The divergence is being driven partly by investor flows. Equity investors continue to favour smaller-company funds, while large-cap schemes have faced sustained redemptions. AMFI data shows that India’s mutual fund industry had ₹87.08 lakh crore in assets under management as of August 31, 2026, with SIP contributions at ₹32,297 crore in August.
For investors with a three-to-five-year horizon, Omniscience believes this flow-driven valuation gap could throw up opportunities in individual large-cap companies that have been overlooked.
“Opportunities for long-term investing are emerging in mispriced pockets of the top 100 companies, which could potentially deliver better performance over the next three to five years,” said Ashwini Shami, president and chief portfolio manager, Omniscience Capital.
Where Omniscience sees opportunities
The fund house is bullish on banks, infrastructure-focused NBFCs, housing finance companies, power, select energy-transition businesses, business services, EPC and select infrastructure companies.
The investment case, according to Omniscience, rests on the combination of growth prospects and valuations that are relatively more attractive than in several parts of the mid- and small-cap universe.
That does not mean the fund house is ruling out smaller companies. Omniscience said the overall small-cap index appears fully priced, but a bottom-up approach can still identify individual opportunities across a universe of nearly 1,000 companies.
FII flows remain a pressure point
Foreign investor flows are another factor shaping the market outlook.
According to Omniscience, foreign institutional investors turned net buyers in July and August 2026, but the buying was significantly smaller than the selling seen during the preceding four months. The fund house said FIIs turned sellers again in September as US Treasury yields rose by 20-30 basis points over two weeks.
The selling pressure has coincided with continued outflows from large-cap mutual fund schemes, limiting the impact of recent foreign buying on large-cap stocks.
The concentration of equity inflows into small- and mid-cap schemes is concerning given their premium valuations, as per the fund house.
“Opportunities for long-term investing are emerging in mispriced pockets of the top 100 companies, which could potentially deliver better performance over the next three to five years,” said Shami.
Bond yields, oil add to market uncertainty
The fund house also expects global rates and inflation to remain important variables for Indian equities. It said persistent US inflation and higher oil prices could keep pressure on bond yields, while a weaker rupee and elevated crude prices could add to India’s inflation risks.
These factors matter for investors because higher bond yields can alter the relative attractiveness of equities and increase the cost of capital for companies, particularly those dependent on borrowing for expansion.
Against this backdrop, Omniscience said large-cap stocks remain broadly investable, but investors should avoid companies where valuations remain stretched despite structural challenges, including businesses facing disruption from artificial intelligence or adverse macroeconomic trends.
Key sectors to watch
Ahead of the festive season, according to Omniscience Capital, banks, infrastructure NBFCs, HFCs, power, select energy-transition stocks, business services, EPC and select infrastructure names offer strong growth outlooks at more attractive valuations.
