Largecaps at 20-year valuation lows versus midcaps; banks, cement top picks: George Joseph

George Joseph, CIO and CEO – Equity at ASK Investment Managers, believes Indian largecap stocks are trading at one of their most attractive valuation points in two decades relative to mid and smallcaps, making them the preferred investment destination amid global uncertainty. Speaking to ET Now, Joseph highlighted that policy measures taken by the Indian government and the RBI over the past year are beginning to support a domestic recovery cycle.

Largecap Valuations Hit Two-Decade Lows

Joseph emphasized the compelling valuation opportunity in largecap stocks, particularly within the Nifty 50 index. "Valuations in the largecap space, especially within the Nifty 50, are extremely attractive. Relative to mid and smallcaps, this is among the cheapest points we have seen over the last 20 years," he stated. ASK's portfolios are currently positioned to capitalize on this valuation disparity.

Earnings Season Outlook and Sector Leadership

Looking ahead to the third-quarter earnings season, Joseph expects leadership to emerge from domestically oriented sectors. The rupee's sharp depreciation, narrowing global market breadth, and ongoing tariff uncertainties create a favorable backdrop for domestic recovery-led sectors.

Joseph noted that recent policy actions including rate cuts, GST reductions, and liquidity measures will start reflecting in corporate earnings throughout the year.

Preferred Investment Themes

ASK Investment Managers maintains a bullish stance on several key sectors, with financial services leading their preferences. The firm particularly favors large private sector banks and select NBFCs, where benefits of an improving cycle are expected to flow through earnings. Cement companies represent another area of interest, with the previous quarter viewed as a washout period and early signs of recovery now emerging.

Energy Transition Opportunities

Joseph highlighted energy transition as a multi-year structural opportunity that should be viewed broadly beyond new-energy companies alone. The theme encompasses primary beneficiaries as well as secondary and tertiary derivatives, including intermediaries and suppliers. "These sectors are volatile by nature, but that is the cycle we are in. While it may not mirror the 2003–07 cycle exactly, the focus on domestic cyclicals makes this phase structurally interesting," he explained.

Sector-Specific Positioning

The investment manager expressed caution regarding metals, noting the sector's exceptional performance over recent years. Joseph pointed out that metals have delivered a six-fold rally over the past five years and emerged as the best-performing segment in 2025. "The metal sector needs time to cool off. Valuations and expectations need to normalise, and we currently have very low exposure to metals," he stated, while acknowledging that selective value-added commodity players could still offer opportunities.

Strategic Focus on Largecaps

Despite recent corrections in the broader market, Joseph's preference remains firmly with largecap stocks. He emphasized that even after the correction, largecaps offer better risk-adjusted return potential compared to mid and smallcaps. Private banks, NBFCs, and cement companies within the largecap universe appear particularly attractive in the current environment. Joseph concluded that while earnings recovery in mid and smallcaps will be monitored closely, the current cycle favors largecap companies with strong balance sheets and earnings visibility.