Following a substantial increase in JARs, valuations are often higher. Currently trading at a PE multiple of 24.3 times a year ago, the Nifty 50 index is 18% higher than its low of 20.5 times this year. Even quicker has been the growth of values in larger markets. The P/E of Nifty Midcap-100 is presently 33 times that of the previous year, 46% higher than the level of March, whilst the value of Nifty Smallcap-100 has increased by 80% to 30.1 times.

Fund managers now feel that large caps provide a better value than mid-and small-cap stocks.

In the recent six to twelve months or two to three years, small and midsized companies have significantly outperformed large caps in the overall market. In comparison to mid-and small-cap stocks, large-cap stocks now appear to be well valued.

Despite a 22% increase from the lows in March, fund managers are pleased with the current Nifty and Sensex values, which are in line with the five-year average and not too high. Although prices have increased due to the current surge, they are still not pricey. They approximately correspond to averages over the long run.

It is possible to relate the widening valuation disparity between large-cap, mid-caps, and small-caps to investor investment. The movement of large-cap equities is comparatively more affected by the investments made by overseas portfolio investors. According to experts, this is the first year since the FPI. That sort of investment has not been made, which explains why large caps have performed slowly. However, a sizable percentage of the substantial inflows from domestic investors have gone directly into small- and mid-cap equities or through mutual funds. According to industry participants, the broader markets appear overheated as domestic investors chase a major advance.

Investing in both debt and equities is part of the asset allocation strategy of Balanced Advantage funds. This approach is contingent on the state of the market and frequently reveals if the fund management believes that the stock markets are too costly. Due to the majority of the allotment falling within the medium category, no clear signal has been observed in this area.

The second-largest fund in the category, ICICI Prudential’s Balanced Advantage Fund, cut its equity exposure at the end of November from 43.6% to 40.2% a month earlier. Depending on the state of the market, the fund, which oversees over Rs 50,000 crore, invests between 30 and 80 percent of its assets to stocks.

Among the other large funds in this category is the Kotak MF fund, which had an allocation of 50.2% at the end of November and an allocation of 50.2% in October, which is somewhat higher than the fund. The distribution of equity reflects opinions about that. As of the end of November, the allocation was 50.2% in stocks, falling between 20 and 80 percent of the total. It has climbed since October, which has led to an increase in the market’s speed and trend.