Investors looking to build a fund portfolio should focus on schemes that invest in large-cap stocks rather than midcaps, said fund managers. Mid-cap funds have outperformed the large-cap funds over the last three years. Even in last one year, the fall in this category of funds has been lower than large-cap funds. But this strength has resulted in mid-cap stocks continuing to trade at a premium to large caps. Fund managers said it makes little sense to continue investments in mid-cap stocks at this juncture.
"Valuation wise, large-caps are better poised. We believe largecap stocks are currently available at a discount to small- and mid-cap stocks (based on price-to-earnings ratio). They present a reasonable investment opportunity," says Sankaran Naren, chief investment officer at ICICI Prudential Mutual Fund.
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