Avendus Wealth has increased its exposure to flexi-cap equities, citing improved valuations following a market correction earlier this year. The firm now favors large-cap stocks over mid- and small-cap segments while maintaining a cautious stance on several alternative assets.
Detailed Coverage
Avendus Wealth has updated its investment strategy, moving flexi-cap equities to an overweight position. This shift comes after a period of market volatility in the first quarter of 2026, where the Nifty 50 recorded a decline of approximately 19% in dollar terms, while mid- and small-cap indices faced corrections of about 17% to 18%. By favoring flexi-cap funds, which have the flexibility to invest across market capitalizations, the firm is positioning itself to capture potential recovery in large-cap stocks, which are currently showing more attractive valuations compared to their recent historical averages.
Valuation Reset and Sector Focus
The current valuation of the Nifty 50, trading at 16.9 times its one-year forward earnings, and the BSE 500 at 18.1 times, both sit at one standard deviation below their 10-year averages. This reset in price-to-earnings multiples has made large-cap opportunities appear more compelling to the wealth manager. Within this strategy, the firm remains focused on banking and financial services along with manufacturing as key structural themes. They are also highlighting interest in companies with strong order books, particularly in the defense and capital goods sectors, as well as firms with established pricing power in areas like automobiles and healthcare.
Strategic Shift in Assets
Beyond flexi-cap equities, Avendus has adjusted its stance on other asset classes. Mid- and small-cap equities, along with gold, silver, and investment trusts like REITs and InvITs, have been shifted to a neutral rating. High-yield credit has also been downgraded from an overweight to a neutral position. For fixed income, the firm continues to favor AAA-rated bonds and non-convertible debentures due to higher yields, while suggesting that investors look toward hybrid specialized funds or arbitrage-plus strategies to potentially improve post-tax returns.
Macro and Geopolitical Risks
While the firm maintains a constructive view on domestic equities, it remains mindful of global pressures. The ongoing geopolitical situation in West Asia remains a monitorable, specifically regarding its potential impact on oil prices. While India’s current foreign exchange reserves and liquidity buffers are considered adequate to manage Brent crude prices near $90 per barrel through FY27, a sustained rise in oil prices beyond this level could create pressure on the trade balance and domestic inflation. Investors may watch how these macro indicators evolve, as sustained supply chain or energy cost pressures could influence future corporate margin stability and market performance.