NewsStocksSMIDs to outperform large-cap stocks as Budget 2026 could be more impactful than usual: Helios Capital CEOSMIDs to outperform large-cap stocks as Budget 2026 could be more impactful than usual: Helios Capital CEO
Dinshaw Irani of Helios Capital expects mid and small-cap stocks to outperform large-caps over two years, citing strong earnings growth of 25-26% for mid-caps and 37% for small-caps versus 10% for large-caps. He believes Budget 2026 could be more market-impactful than usual, recommending removal of long-term capital gains tax and increased government capex spending. Despite recent corrections, domestic macroeconomic indicators remain strong, with selling pressure primarily from HNI and UHNI investors.
*this image is generated using AI for illustrative purposes only.
Dinshaw Irani, Managing Director and Chief Executive Officer of Helios Capital Asset Management, expects mid and small-cap stocks to significantly outperform large-caps over the next two years, driven by substantial earnings growth divergence across market segments. Speaking in an exclusive conversation, Irani highlighted the sharp performance gap between different market capitalisation categories and outlined his investment strategy amid current market uncertainties.
Strong Earnings Growth Divergence Favors SMIDs
Irani pointed to compelling earnings growth data that supports his preference for mid and small-cap stocks over large-caps. The performance divergence across market segments has been particularly pronounced, creating attractive opportunities in the SMID space.
| Market Segment | Earnings Growth |
|---|---|
| Large-cap companies | ~10% |
| Mid-cap companies | 25-26% |
| Small-cap companies | ~37% |
The strong performance in mid and small-caps has been supported by a favourable base effect. With the low base continuing into the December and March quarters, Irani expects mid and small-caps to outperform once market scepticism eases. He remains constructive on Indian equities over a two-year horizon, with a clear preference for these segments.
Budget 2026 Expectations and Market Impact
Irani believes the upcoming Union Budget could be more impactful for markets than usual. He has outlined specific policy recommendations that could help stabilise markets and improve investor confidence.
| Policy Recommendation | Expected Impact |
|---|---|
| Remove long-term capital gains tax | Stabilise markets and improve investor confidence |
| Increase government capex spending | Support growth and market sentiment |
| Focus on fixed asset creation | Even if it means temporarily easing fiscal deficit targets |
"Higher capex spend can support growth and market sentiment," Irani said, adding that this year's Budget will be closely watched both domestically and globally. The policy measures could provide significant support to market performance and investor sentiment.
Domestic Macros Remain Resilient Despite Correction
Turning to India's economic fundamentals, Irani emphasised that domestic macroeconomic indicators remain strong and are improving, despite recent market corrections. He rejected the notion that Indian markets are highly volatile, characterising the current phase as a one-sided decline rather than true volatility.
According to Irani, selling pressure has largely come from HNI and UHNI investors, particularly after sharp declines in small-cap stocks. Foreign institutional selling has weighed on market sentiment, even as domestic mutual funds remain flush with cash and retail participation stays firm. This suggests that the correction may be more technical than fundamental in nature.
Sectoral Preferences Focus on Domestic Consumption
Helios Capital is focusing on domestically driven consumption themes rather than export-oriented businesses, given global uncertainties. Irani outlined his sectoral preferences based on improving domestic conditions.
Preferred Sectors:
- Consumer-facing private banks
- Select NBFCs
- Insurance companies
- Asset managers
- Healthcare, particularly hospitals
- Consumer technology platforms
- Discretionary consumption
- Hospitality
Irani expressed optimism around discretionary consumption and hospitality, citing improving liquidity conditions and easing borrowing costs as key tailwinds. This domestic focus reflects the firm's strategy to capitalise on India's internal growth drivers while avoiding global uncertainty.
Global Risks and Precious Metals Outlook
Amid heightened global uncertainty, Irani identified geopolitical risks, particularly emanating from the United States, as currently the biggest drivers of global markets. Policy unpredictability and geopolitical posturing have increased risk aversion globally, pushing investors towards safe-haven assets such as gold and silver.
Irani noted that the rally in precious metals is primarily a function of uncertainty rather than industrial demand. However, he remains cautious on metal stocks due to China's dominant influence on global supply dynamics and its ability to release or withhold capacity. Helios Capital typically avoids cyclical sectors as part of its investment strategy.
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