Kotak Warns Small & Midcap Euphoria May Sour as Investors Chase Quick Returns

Economic Times Markets · stocks

Kotak Institutional Equities notes a divergence in India's stock market, with investors favouring small and midcap stocks over attractive largecaps. This enthusiasm for smaller companies is driven by positive developments in sectors like capital goods and defence, supported by government manufacturing initiatives. However, Kotak finds it increasingly difficult to identify value in this space due to steep valuations, suggesting prices are outpacing underlying worth. The brokerage believes investors are prioritizing recent returns over fundamental valuation, leading to a market driven by price cues rather than intrinsic value.