Largecaps look more attractive than mid and smallcaps, says JioBlackRock AMC’s Rishi Kohli

Rishi Kohli, Chief Investment Officer at JioBlackRock Asset Management Company, believes largecap stocks offer better opportunities than mid and smallcaps at current levels, given the relative valuations and earnings outlook.

Kohli said, “Largecaps valuation wise, if you look at last 10-15 year multiples, again you’re getting them at discounts. They’re not cheap by historical standards, but then last 10-15 years is more relevant because the construct of the index is changing with many new age companies and other sectors coming in, which were not even there till 10-15 year back. So from all those aspects, yes, a little more comfort in largecaps.”

Kohli said the recent performance of large, mid and smallcap stocks has largely reflected differences in earnings growth. Midcaps have benefited from relatively consistent earnings delivery, while smallcaps have performed better in recent months. Largecap earnings growth, meanwhile, has been comparatively subdued.

However, the valuation gap between small and largecaps has widened to levels that could favour a reversal over the medium term. Technical indicators also suggest that the relative performance of smallcaps may be approaching a turning point.

Kohli said these signals do not necessarily mean a reversal is imminent, but they indicate that largecaps could offer a more attractive risk-reward opportunity.

He expects markets to remain tactical, with periods of gains and declines prompting investors to rotate between sectors rather than rely on a sustained rally across the broader market.

Kohli remains cautious on the IT sector despite the possibility of a near-term bounce in share prices.

He said JioBlackRock AMC’s quantitative and systematic sector rotation fund has maintained its largest underweight position in IT since its launch around nine to ten months ago. The model considers multiple data points, including fundamental and alternative data, to determine sector allocations.

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One concern is the limited contribution of AI-related business to the revenues of most Indian IT services companies. While companies are reporting progress in AI-related projects, the financial benefits could take another one to two years to become meaningful.

Kohli also flagged continued margin pressures and a relatively modest growth outlook for largecap IT companies as reasons for caution.

Although lower valuations could support a recovery in the near term, he believes the sector faces more persistent challenges over the medium term.

“From a medium-term perspective, still looking very tough for that sector,” Kohli said.

For investors, the distinction between a short-term recovery and a sustained improvement in fundamentals will be important when assessing IT stocks. Until earnings growth and AI-led business opportunities translate into stronger financial performance, the sector could continue to face pressure.

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Largecaps look more attractive than mid and smallcaps, says JioBlackRock AMC’s Rishi Kohli

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