After 3 years, spotlight back on large-caps

Thinning valuation gap between these and mid-caps indicates a shift in their favour

After nearly three years of trading on the BSE at a significant discount to the benchmark Sensex, the asking rate for large-cap stocks is increasing once again. The S&P BSE Sensex currently trades at 17.3 times the estimated calendar year 2017 earnings, while the BSE Mid-cap index is at 18.7 times, by Bloomberg calculations. The premium commanded by mid-caps vis-a-vis the Sensex has thereby reduced to 7.5 per cent.

Mid-caps had started trading at a premium to large-caps from 2014 onwards. The BSE Mid-cap index premium over the Sensex, 10.3 per cent in 2014, rose to 28.7 per cent in 2015