Ambit prefers largecaps over midcaps for the next two quarters

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Nitin Bhasin, Head-Institutional Equities at Ambit sees consumption and banks offering more predictable growth than expensive capex-heavy themes. Recent festive checks show healthy demand across several consumer categories, while Ambit has reduced exposure to parts of healthcare.

Largecap stocks could continue to outperform over the next one to two quarters as corporate earnings improve and foreign investors find better value in India's biggest companies, according to Nitin Bhasin, Head-Institutional Equities at Ambit.

Bhasin said largecaps remain attractive compared with midcaps, particularly because they can absorb large amounts of foreign capital when global investors turn more positive on India. Recent quarterly results have also pointed to an improvement in largecap earnings.

"Given the valuation differential between largecaps and midcaps, given the ability to deploy much larger capital of the global capital when it wants to move into India, we still continue to prefer largecaps at least for the next quarter or two," he said.

Ambit's recent festive season checks also suggest that consumer demand is holding up well. Four-wheelers, apparel, footwear, jewellery and consumer durables have shown healthy trends over the past five to six weeks, with some categories seeing an acceleration.

Bhasin said logistics and delivery companies can benefit from this broader consumption trend as they work with multiple e-commerce and consumer platforms. Rather than being tied to a single sector, these businesses offer exposure to several areas of consumer spending.

The brokerage is also shifting some of its focus towards banks and consumption stocks, where growth could be more predictable in the coming quarters. Bhasin believes these segments could offer better opportunities than some capex-heavy themes that have seen sharp rallies and stretched valuations.

"I would bet my money slightly more on consumption and banks in the next couple of quarters versus capex-intensive themes," he said.

Ambit has, meanwhile, reduced its exposure to parts of the healthcare sector. While Bhasin sees Contract Development and Manufacturing Organisation (CDMO) businesses as more scalable and less prone to risks than hospitals, he believes valuations in some pockets of both segments…

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