Mumbai, Aug 19
The Indian equity markets are benefiting from long-term growth tailwinds but are witnessing short-term valuation risks, a report said on Tuesday.
"The domestic stock market is entering FY26 with cyclical headwinds but strong structural drivers," Enquirus Securities said in its report.
"We are Overweight on auto, capital market, cement, FMCG, infra, internet platforms, NBFC, oil & gas sectors, while we are underweight on building materials, industrials and defence, real estate, textile, logistics sectors,” said Maulik Patel, Head of Research, Equirus Securities.
The brokerage house has kept a neutral stance on banks, chemicals, consumer durables, EMS, IT services, metals and mining, healthcare, and retail sectors.
The brokerage, in the report, paints a note of caution on smallcaps, pointing out that the small-cap forward P/E ratio stands at 1.25 times, compared to the long-term average of 0.88 times (just below the 1.3 times peak), with Nifty 50 trading above its 10-year average.
Midcaps remain elevated but offer stronger earnings visibility than smallcaps, where multiple expansion dominates, the report highlighted.