The distinction between consistency and alpha — because growth is now higher outside of large cap indexes

Consistent performance is achieved with constructs close to index and being very index aware. Active ratios may be high, but the construct could still be close — a stock held outside the index but in the same sector.

Up until FY20 and FY21 large caps delivered better earnings growth versus small and midcaps over most periods since the start of the century, and outcomes from constructs away from the index were not satisfactory. Now growth is higher outside, so such constructs may provide greater opportunity over a period of time — though they can have different risk characteristics.

FPI holdings have declined across the board but remain meaningful at close to 20% in large caps. FPIs are selling lower growth index heavy sectors, which could create opportunities for growth oriented investors to generate alpha. Flows appear to be following earnings.

The MO universe excluding OMCs grew sales, EBITDA and PAT by 18%, 15% and 22% year on year, led by BFSI at 19%; metals grew 57% and oil and gas ex-OMCs 54%. Airlines, cement and OMCs dragged the aggregates.

The broad market recorded higher earnings growth than large caps: large caps grew 21%, midcaps 23% and small caps 31%.

Many of the risks of the past period seem to be getting addressed — oil below $90, FPI flows more neutral, the rains have come, reserves past $700 billion, the market still below February 2026 levels and valuations defendable. Key risks now include the large supply of paper, though some issuances have been withdrawn; the war in the Middle East seems to be elongating and preventing a further fall in oil prices; and trade sanctions seem to be a continuous threat.

The only way to insulate a country against the oil price increase is to electrify with domestic fuel sources — solar, wind and hence BESS, coal, biomass. Forex stress galvanizes attention on import substitution.