Midcaps to outperform large, smallcaps in 2026: Nilesh Shah, Kotak AMC

After a stellar run in 2025, gold and silver, Shah said, should continue to see upside in the year ahead, aided by sustained central bank buying

Stocks from the midcap universe are likely to outperform their large-and small-cap peers, believes Nilesh Shah, managing director of Kotak Mahindra AMC. The margin of outperformance of midcaps over their peers, however, may remain narrow, Shah said while unveiling their market outlook for calendar year 2026 (CY26).

 

“Equity returns in FY26 are likely to be anchored in earnings growth, with India Inc. expected to deliver double-digit growth in fiscal 2026-27 (FY27). This strength is likely to attract foreign portfolio investors (FPIs), supporting market liquidity,” Shah said.

 

After a stellar run in 2025, gold and silver, he said, should continue to see upside in the year ahead, aided by sustained central bank buying. “Investors are advised to moderate return expectations and adopt a balanced, diversified approach across asset classes to navigate evolving market dynamics,” he added.

 

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Thus far in calendar year 2025 (CY25), the BSE Midcap index has returned a modest 0.4 per cent till date, while the Sensex has moved up 8.6 per cent during this period, data shows. BSE Smallcap index, on the other hand, has lost 6.6 per cent during this period.

 

Where to invest in 2026? Key themes

 

Kotak AMC's key investment themes for 2026 include the financial services sector on the back of an uptick in credit growth, consumption-related themes in the backdrop of rising incomes, GST reforms, and festive demand. "Rural Income per capita has crossed the $2000 mark, a key inflection point that typically drives higher discretionary spending, benefiting sectors like autos," Kotak AMC said. 

 

With India among the lowest penetrated markets for two-wheelers and passenger vehicles globally, the AMC believes rising aspirations, GST tax relief, benign inflation, and rural recovery would drive demand for vehicles.

 

E-commerce and healthcare are the other two sectors where Kotak AMC believes there is scope for growth in the year ahead. Overall e-commerce penetration, Kotak AMC said, is expected to rise to 12–13 per cent by FY30, with categories like electronics and beauty & personal care leading the surge.  "The market remains highly consolidated, with the top three players commanding nearly 80 per cent share, creating a strong runway for scale and profitability as organized retail and premiumisation trends accelerate," Kotak AMC's note said.  (Disclosure: Entities controlled by the Kotak family have a significant holding in Business Standard Pvt. Ltd.)