Summary
What if the biggest stocks… aren’t too boring, but too undervalued to ignore? While small and mid-caps are trading at steep valuations, India’s top 10 mega-caps look surprisingly attractive, both in price and potential. This blog breaks down why the heaviest stocks might just have the lightest risks right now.
Right now, from a relative standpoint, the 10 largest Indian stocks by market cap (let’s call them mega-caps) appear much more attractive than small- and mid-cap (SMID) stocks.
Here’s why.
In the wake of COVID, SMIDs underwent a major re-rating, meaning that investors were willing to pay higher prices for the same earnings. As a result, their median PE (price-to-earnings) multiple rose to unprecedented levels, taking investors by surprise.
There have been bear markets in the past that dragged the median SMID multiple down to low-to-mid single-digit numbers. Naturally, during such times, SMIDs became exceptional opportunities for long-term investors.
However, currently, the long-term median multiple for the SMID universe stands at 19x. As can be seen below, an investor looking at this multiple in 2007 would have found it to be highly inflated, but now, it’s just the average.
Source: Bloomberg, DSP. Data As of June 2025
Moreover, the current median PE multiple for SMIDs is 44x. The last time it was at a comparable level, the market witnessed a deep drawdown and a year of poor returns. Thus, SMID valuations appear to be too high right now.
In contrast, the top 10 companies by market cap, i.e. the mega-caps, have underperformed since the COVID bottom, as can be seen below.
Source: Bloomberg, DSP. Data As of June 2025
But currently, macroeconomic structuring and relative valuations both favour the mega-cap universe.
Every economy has to decide which two of the following three it wants to focus on: macroeconomic stability, return on equities (ROE), and scale. India has chosen the path of macroeconomic stability and higher ROEs. For this reason, companies that can scale up while maintaining their ROEs have a major competitive advantage, and can show steadiness even in times of distress.
The mega-caps are well set to benefit from this trend. In addition, they are priced more attractively than the broader market, both in terms of valuations and price, which makes the mega-cap universe doubly attractive.
For more actionable insights backed by data and analyses, we invite you to read the latest edition of Netra in its entirety.
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