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Large Caps Reign: Agrawal Says They're the New Midcaps

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  Published in Business and Finance on Friday, December 26th 2025 at 12:38 GMT by Zee Business

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Large Caps: The New Midcaps – Motilal Oswal’s Raamdeo Agrawal on the Next Market Phase

In a recent commentary that has captured the imagination of market‑watchers, Motilal Oswal’s founder and legendary investor Raamdeo Agrawal drew an intriguing analogy: large‑cap stocks are now behaving like the new mid‑caps. The statement, posted on Zeebiz’s “Market News” section, comes at a time when the Indian equity market is undergoing a structural shift, with large‑cap performers eclipsing the traditionally vibrant mid‑cap arena. Agrawal’s observation, backed by data and a broader macro‑economic perspective, points to a coming “phase” in which growth opportunities are likely to pivot away from the mid‑caps and into the large‑cap space.

1. The Market Context

Over the past 12–18 months, the Nifty 50 (the benchmark large‑cap index) has surged ahead of both the Nifty Midcap 150 and Nifty Smallcap 250. A quick glance at the indices shows:

The data reveal a widening performance gap: while large caps continue to deliver steady upside, mid‑caps have slowed to a pace that is only marginally better than small caps. The article references a chart (linked within the Zeebiz piece) that visually underscores this trend, making it clear that the “mid‑cap” segment has been outclassed by large‑cap growth in recent quarters.

2. Raamdeo Agrawal’s Premise

Agrawal’s core assertion is that the large‑cap sector has become the new “mid‑cap” class of stocks—in terms of growth potential, risk profile, and relative valuation. In a nutshell:

“We’re seeing large‑cap firms that exhibit the same upside dynamics we once found in mid‑cap names. They’re no longer the ‘steady‑state’ businesses we used to see; they’re now the drivers of growth for the next phase of the market.”

The explanation hinges on three pillars:

1. Valuation Compression – Large caps have been trading at lower price‑earnings (P/E) multiples relative to their growth prospects. The P/E of the Nifty 50 has tightened from 22x in 2021 to 19x mid‑2024, while their earnings growth remains robust (≈ 10–12 % YoY).

2. Earnings Momentum – Many large‑cap conglomerates, especially in technology, financial services, and consumer staples, have reported sequential earnings surges. For instance, IT behemoths such as TCS and Infosys have delivered double‑digit growth in their revenue streams.

3. Risk‑Adjusted Returns – Compared to mid‑caps, large caps enjoy better liquidity, lower beta, and more resilient balance sheets. In volatile periods, the latter’s stability translates into risk‑adjusted returns that outstrip the more volatile mid‑cap territory.

Agrawal stresses that this shift isn’t just a statistical quirk; it’s a structural transformation. Mid‑caps, once the go‑to segment for growth‑seeking investors, are now being supplanted by a cohort of large‑cap companies that possess both the scale and the growth engine.

3. What This Means for Investors

A. Re‑allocating Capital

The article urges investors to reconsider how they allocate capital across market segments. Historically, mid‑cap exposure constituted a sizable portion of growth portfolios. However, given the new dynamics, a shift toward large‑caps may be prudent, especially for investors with a medium‑to‑long‑term horizon.

B. Focus on Growth‑Heavy Large Caps

Agrawal highlights specific sub‑segments within the large‑cap universe that are especially promising:

• Technology and Digital Services – Firms that have capitalized on cloud computing, e‑commerce, and digital payments.
• Financial Services – Banks and fintechs that have benefitted from higher interest rates and a shift to digital banking.
• Consumer Staples & FMCG – Brands that have broadened their product lines and leveraged e‑commerce distribution channels.

C. Mid‑Cap as a Diversifier, Not the Growth Driver

While mid‑caps still offer upside potential, the article suggests they should be treated more as a diversification tool than the core growth engine. With mid‑cap valuations now hovering near the small‑cap range, the risk premium may not justify a large allocation.

D. The Role of Macro‑Drivers

Agrawal also points out that the broader macro environment—rising global interest rates, RBI’s monetary policy stance, and India’s fiscal roadmap—will influence which segments thrive. Large caps, with their diversified revenue streams, are better positioned to weather macro shocks.

4. The “Next Market Phase” – A Look Ahead

Agrawal’s statement is framed within the context of the “next market phase.” What does that entail?

• Valuation Cycles Reset – As large caps become the new mid‑caps, their valuation multiples will continue to tighten, creating a window for value‑seeking investors.
• Investor Sentiment Shift – With large caps delivering consistent growth, institutional flows are expected to flow into the sector, amplifying its momentum.
• Emergence of New Growth Themes – Themes such as ESG, renewable energy, and digital infrastructure will increasingly play out within large‑cap companies, further cementing their role as the next growth drivers.

In other words, the article argues that we are on the brink of a fundamental recalibration where large‑cap stocks will take the lead in delivering the next wave of upside.

5. Additional Context – Linking to Broader Coverage

Within the Zeebiz piece, a few links provide further depth:

• A chart illustrating the historical performance comparison between the Nifty 50, Midcap, and Smallcap indices.
• A research note from Motilal Oswal’s Equity Research team on the earnings outlook for large‑cap Indian corporates.
• A brief on RBI’s recent policy decisions that could affect large‑cap valuations.

These supplementary resources help contextualize Agrawal’s viewpoint and offer concrete data for those who wish to dig deeper.

6. Bottom Line

Raamdeo Agrawal’s observation that large caps are the new mid‑caps isn’t merely a catchy headline—it reflects a tangible shift in market dynamics. The evidence—tightening valuations, consistent earnings growth, and a narrowing performance gap—suggests that investors should consider realigning their portfolios toward the large‑cap universe. While the mid‑cap space still offers opportunities, it now serves more as a complementary diversification tool than the primary growth engine. As the market enters its next phase, large‑cap stocks stand poised to deliver the growth and stability that investors have long sought.

Source: Zeebiz, “Large caps are new midcaps: Motilal Oswals Raamdeo Agrawal big bet for next market phase” (link provided in the original article).