Nifty’s mega‑cap segment, which has traditionally driven the index’s gains, is showing limited upside as institutional investors tighten their buying amid high ownership levels and a shift in earnings momentum towards mid‑ and small‑cap stocks. This trend has prompted fund managers to rethink exposure to the top‑tier companies that dominate the Nifty 50. Samco’s Chief Investment Officer, Umesh Mehta, has re‑balanced the firm’s flagship Flexicap fund by allocating 70–75% of its holdings beyond large caps.
The move is aimed at capturing growth in sectors that are expected to outperform, such as defence, power, artificial‑intelligence ancillaries and gold‑linked equities. Mehta argues that these themes offer a better risk‑adjusted return profile when mega‑cap valuations appear stretched. The defence and power space, buoyed by renewed procurement plans, is seen as a long‑term catalyst, while AI ancillaries benefit from a broader digitalisation push across India.
Gold‑linked stocks provide a hedge against inflation and currency volatility, which can be attractive in a volatile market environment. However, Mehta cautions that the surge in IPO activity could compress liquidity, especially in mid‑cap names, and that retail investors should be mindful of higher volatility. Diversifying beyond mega caps may offer upside, but it also demands careful monitoring of sector‑specific risks and market liquidity conditions.