Fund View: UTI AMC favours India's large-cap stocks as broader market rally stretches valuations

UTI Asset Management

11/08/2026 03:57

By Bharath Rajeswaran
Aug 11 (Reuters) - UTI Asset Management prefers select large-cap stocks with stable earnings outlook as sustained fund inflows into mid- and small-caps push up valuations across parts of India's broader market.
The fund house, which manages about 4 trillion rupees ($42 billion) in mutual fund assets - about 5% of the asset-management industry's AUM, is not questioning India's growth outlook. Its concern is whether share prices adequately reflect the execution required to meet elevated market expectations.
Mid-cap and small-cap funds drew 302.9 billion rupees and 305.2 billion rupees, respectively, in the first half of 2026, against 133 billion rupees for large-cap funds.
"For me, valuation is a bigger part (of the investment decision)," V Srivatsa, UTI AMC's executive vice president for equity, told Reuters on Monday.  
The small-cap and mid-cap indexes trade at trailing 12-month price-to-earnings ratios of 32.2x and 31.0x, respectively, higher than the five-year historical medians of 29.0x and 29.5x, according to Trendlyne data.
The flows, along with stronger earnings in some sectors, have helped lift the Nifty Midcap 100 .NIFMDCP100 5.6% and Nifty Smallcap 100 .NIFSMCP100 11.9% this year and hit record highs, compared with a 5.9% decline in the benchmark Nifty 50 .NSEI.
The divergence has made some large-cap stocks seem attractive. Near-term growth concerns in IT shares, for instance, have crimped valuations, with the IT index .NIFTYIT down 16.5% so far this year. 
Large IT firms trade at 11x-14x earnings and offer free-cash-flow of 5%-6%, compared with roughly 18x-19x for the Nifty 50, Srivatsa said, adding "concerns that AI will hollow out India's IT-services model are overstated."
"AI is not a do-it-yourself kind of job," he said, adding that companies will still need providers such as TCS TCS.NS and Infosys INFY.NS to implement and manage the technology.
Apart from IT, UTI has a "minor overweight" in healthcare and is "equal-weight" to "moderately overweight" financials, particularly private banks. 
The fund house also favours insurance and telecom, while turning more constructive on autos after stronger-than-expected June-quarter earnings, although it remains "moderately underweight".
UTI remains "underweight" on capital goods, power equipment, defence and electronic manufacturing services, despite their strong earnings outlook, citing valuations of 45x-50x forward earnings and execution risk. 




 (Reporting by Bharath Rajeswaran in Bengaluru; Editing by Sonia Cheema)
 ((bharath.rajeswaran@thomsonreuters.com; +91 9769003463;))