Can large-caps continue to outperform next year? Abhishek Singh of DSP Mutual Fund explains

Expert view: Abhishek Singh, Fund Manager, DSP Mutual Fund, believes over a 7-10 year cycle, large-caps are positioned to outperform. While recent corrections have made valuations attractive but they are still not cheap. He finds value in financials, IT and utilities among key sectors. Edited excerpts:

Since last Diwali, large-cap stocks have outperformed the broader market. Do you expect this trend to continue?

Likely yes. Even over a 7–10 year cycle, large-caps are well-positioned to do relatively better. After a correction over a period of time, valuations are less stretched than they were a year ago, though they’re still not cheap. Within the index, heavyweights such as financials look attractive. IT is reasonably valued but faces near-term concerns, while some Utilities and Oil & Gas names appear inexpensive. Net-net, roughly 55% of the index lies in areas where downside risks seem limited.

Your scheme has consistently outperformed the category average and benchmark. What kind of stock selection approach do you follow?

I’ve managed the large-cap scheme for about three years. The last two were strong, while this year we’re trailing the benchmark by around one per cent. Consistency over one or even three years isn’t our goal. Over a 10–15-year horizon, if we can outperform benchmarks 70–80% of the time on rolling five- to seven-year periods, that’s an outcome we’d consider successful.

My stock selection approach focuses on buying where implied expectations are low, essentially buying low downsides. The world and markets tend to surprise the consensus. When downside risk is limited, upside often materialises and usually from unexpected quarters.

Which kind of investors can consider a large-cap fund? Would you say it’s a must-have?

The goal of investing is not to pick the category with the highest return, but to choose a product investors can stay invested in for the longest time -without being shaken out by volatility or corrections. One good way to evaluate a product is by observing how investors behave during its worst periods. Typically, investors display better discipline with large-cap and hybrid funds. This confidence leads to higher long-term allocation and better outcomes. That’s why I often recommend conservative categories that help investors stay invested longer and benefit from compounding.

Your scheme has a large allocation to private banks. What makes you bullish?

Like individuals, some sectors face more scrutiny than others, and financials are no exception. Every quarter brings new worries, yet banks continue to compound book value at mid-teen rates. The chances of a major derating from here look low, so mid-teen returns seem achievable. Beyond financials, select Utilities and Oil & Gas names also look attractively valued.

FPIs have been big sellers in Indian equities in 2025. What could bring them back?

Improving earnings growth relative to other emerging markets will be a key driver. That said, we tend to overanalyse flows. They’re mostly zero-sum when FPIs buy, DIIs often sell, and vice versa. Flows don’t change intrinsic value; they only affect prices in the short term. Markets eventually revert to fair value. While flows can influence currency and macro variables in the near term, long-term investors are better served by focusing on fundamentals rather than chasing flow trends.

Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.