The Indian stock market is expected to see healthy gains in the medium term due to a healthy macro set-up and increased government capital expenditure. However, the market’s performance may be more normalised compared to the last five years, according to Harsha Upadhyaya, a fund manager at Kotak AMC.
“The medium-term outlook of the Indian stock market is moderately positive, supported by steady domestic demand, rural recovery, and government capex. Large caps appear better positioned for stable returns. Market performance is likely to be healthy but more normalised compared to the last 5 years,” said Upadhyaya.
While the global economy is currently influenced by US tariffs and geopolitical conflicts worldwide, India is in a comfortable position with government stability, tax reforms, and monetary policy easing in the first half of the calendar year 2025.
The confluence of monetary and fiscal policy impulses is likely to facilitate a meaningful pickup in urban consumption alongside the already robust rural demand.
“India clearly stands as ‘the oasis in the desert.’ Even though FIIs have been sellers in 2025, they take exposure in India via direct stock buying or the mutual fund route,” said Upadhyaya.
Experts suggest flexi-cap funds
Upadhyaya said the medium-term strategy should emphasise quality and stability, with higher allocation towards large-cap, multi-cap, and flexi-cap funds.
“SIPs remain the best tools to navigate volatility without emotional decision-making. A balanced mix of equity and debt ensures resilience amid global uncertainties,” said Upadhyaya.
Among the various equity scheme categories, flexicap funds offer the freedom to invest in large, mid, and small-cap stocks without fixed allocation rules.
This flexibility helps them adjust portfolios based on market conditions, combining stability with growth opportunities. Their adaptable approach and wide diversification make them a strong option for long-term equity investors.
From the flexicap category, one of the funds with strong performance is Kotak Flexicap Fund. This Fund has been a recipient of FII flows in the past and also in the current year and has outperformed the benchmark across various time periods, backed by the quality portfolio, Upadhyaya said.
This consistent performance has attracted foreign institutional investor (FII) flows into the fund in the past and continues to do so, signalling strong global confidence in its strategy.
As FIIs are increasingly allocating to Indian equities, flexicap funds offer a balanced way to participate in this growth.
The top overweight sectors of the fund are chemicals and cement, where the fund manager expects industry fundamentals to improve. The key underweight sectors in the portfolio are financials, FMCG, and consumer durables.
The fund has delivered competitive returns across short and long horizons, outperforming Nifty 500 TRI in most periods. Moreover, it has an exposure across large, mid, and small caps, reducing concentration risk and capturing opportunities across market cycles.
Currently, the large-cap allocation is about 74%, the mid-cap allocation is about 19%, and the small-cap allocation is approximately 5%.
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Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of the expert, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
