After two years of muted index returns and a record Rs 2.85 lakh crore FII selloff in 2026, investors are questioning where the market goes next. Axis AMC’s Head of Equity, Shreyash Devalkar, says the real story lies beneath the headlines. In this interview, he explains the AI-driven FII exodus, the large-cap versus mid-cap debate, sector opportunities and why SIPs remain his preferred strategy.

Edited excerpts from a chat:

Given the fact that the equity market has underperformed in the last 2 years, where investors have hardly made any return at an index level, what is your outlook now?
The headline market and market internals are telling different stories. The headline is reacting to macro factors — FII flows, rupee concerns, crude oil prices — all ultimately tied to the ongoing war. The segments underperforming the most are banks and NBFCs, precisely because these macro issues hit them hardest. The government and RBI have responded quickly, which is genuinely welcome. These measures could be meaningful. But resolving the root cause — the balance of payments pressure, the rupee, and what flows from that — matters more than any one-off flow measure.FIIs have already pulled out around Rs 2.85 lakh crore from the market in 2026 alone. How much of it is due to macros, AI trade and how much due to valuations?

It’s because of the AI trade. Global investors are seeing growth opportunities in AI-linked markets, against our nominal GDP growth in high single digits. That pull isn’t something we can control. What we can control is domestic policy response, and on that front the government has done what it can to bring stability.
The underlying economy, importantly, has held up well. Q4 earnings growth came in at 14–15%, cash flows were healthy, there’s no visible NPA stress, and company commentary hasn’t flagged any serious ground-level deterioration yet. The impact of the war may show up more clearly by the end of Q2, but as of now the economy has been resilient. These macro headwinds, the sooner they resolve, the better — but they’re masking what is otherwise a decent underlying picture.
Which sectors do you think offer reasonable growth at reasonable valuations?
Large caps are reasonably priced, but that comes with a caveat — their growth is largely anchored to nominal GDP, and that limits how much they can outperform. Banks can’t sustainably outgrow GDP. Large FMCG companies face the same ceiling. The same logic applies to large-cap IT, autos, insurance, telecom, OMCs, and even larger consumer discretionary and retail names — they’re big enough now that GDP is essentially their growth rate. That’s why they look cheap. You get valuation comfort in this space, but you carry growth risk and timing risk. You can’t predict when the macro overhang lifts — whether it’s three months, six months, or a year. So entering large caps today means accepting that uncertainty in exchange for reasonable valuations.
On the other side, mid and small caps have growth. Power, especially renewable power, data centres, EV transition, hospitals, and capital-markets-linked businesses are all doing well. These are themes with genuine structural tailwinds, and they’re represented more in the smaller end of the market. The challenge is that this is now well-known and well-owned. Valuations in this space have run up, and in some cases significantly. Every quarter, the market waits for a trigger in large caps; when it doesn’t come, the money rotates right back into mid and small caps. That cycle has been playing out since 2024 into 2026.

So how are you positioned in your funds?
In the large-cap fund, the portfolio is kept almost entirely in large caps — that’s the mandate, and the team has chosen to honour it strictly. In multicap and balanced advantage funds, the approach is more balanced — exposure on both sides, growth and value, without being skewed entirely in either direction. That’s reflected in category outcomes: mid-cap funds are outperforming multicap, multicap is outperforming flexicap, and flexicap is outperforming Large & Midcap funds. That’s the natural order given where the growth is sitting right now.

On risk management within the portfolio, active steps are being taken wherever valuations look stretched. In the multicap fund, mid-and-small-cap allocation is running closer to 25% rather than the 30–35% the category permits. In the Large & Midcap fund, the mid-cap allocation is closer to 65% rather than pushing toward 75%. These are deliberate calibrations — trimming exposure where the upside looks limited, without exiting entirely, because anchoring purely on valuation can leave you waiting indefinitely for a macro catalyst that may not come on schedule.

It’s also worth noting that expensive valuations aren’t confined to mid and small caps. Within large caps, the Nifty Next 50, particularly the bottom 25 names in that index, are also trading at full valuations, not cheap levels.

If someone has fresh money to invest in this stage of the market, would you recommend SIP or lumpsum investments?
SIP is the preferred approach. A lump sum makes sense when valuations are clearly cheap, or when there’s a specific identifiable event where you can assign a reasonable probability of a positive outcome and position ahead of it. Neither condition is clearly met right now. The longer uncertainty persists, the less conviction the market has about a near-term resolution. For investors who have been running SIPs for the last two years, the right move is to continue. Someone with very strong conviction on crude resolution could consider a lump sum but that conviction needs to be robust and keep strengthening over time.

What’s your broader view on the IT space?
IT is not a buy-and-hold at current levels. The structural issues predate AI — growth in US corporate IT services spending had already slowed, and that’s not a transitory phenomenon. AI has added further pressure by giving clients another reason to hold back budgets. So you have two compounding headwinds: clients not wanting to increase spend given macro uncertainty, and AI creating substitution risk.

If growth lands at 5–6%, that’s not sufficient justification for equity risk — a fixed-income product delivers comparable returns with far less uncertainty. The ex-growth valuation for this kind of business is closer to 10–12 times earnings. We’re not at that level yet, though rupee depreciation is providing some support, which is why stocks aren’t in freefall. If you add it up — 3–5% earnings growth, plus ~4% combined dividend yield and buybacks, plus rupee tailwind — the total return isn’t catastrophically bad. That’s why the sector is more likely to see periodic pullback trades around specific news flow — an AI narrative shift, a better-than-expected quarter — rather than a sustained re-rating. It’s a trade you may or may not be able to capture, not a long-term compounding story.

ET Intelligence Group: Waterways Leisure Tourism, a domestic ocean cruise operator, plans to raise ₹585 crore through a fresh issue to fund its subsidiary’s lease payment and general corporate purposes. The promoter group’s stake will fall to 89.3% after the IPO from 99.3%. The company covers domestic destinations including Mumbai, Goa, Kochi, Chennai, Lakshadweep, Visakhapatnam, Puducherry, and select international destinations such as Sri Lanka, Thailand, Singapore, and Malaysia. Around two-third of the passengers come from Mumbai, signaling high dependence on one port. It has recorded negative cash flow from operations in FY26 due to lease payments. It also has a high attrition rate, which has increased to 43% in FY26 from 33% in FY24. The business is susceptible to risks arising from security threats and regional conflicts Given these factors, investors may wait to see clarity in financials.

Business

Incorporated in 2020, Waterways Leisure Tourism currently operates a single cruise vessel, the ‘MV Empress‘, with a passenger capacity of 2,005. It has acquired two new cruise vessels on lease, which will be introduced in the current and next fiscal years with a combined capacity of up to 3,940 guests. The company outsources maintenance, operations and management of gaming arcade, spa, and casino to third-party providers, with nearly 21% of its revenue allocated to these services. Average ticket price grew 9% annually to ₹10,979.9 and revenue per passenger rose 7% annually to ₹12,036.4 between FY24-26.

Financials
Revenue declined 2% year-on-year to ₹579.7 crore while net profit tumbled 69% to ₹52.1 crore in FY26. Operating margin before depreciation and amortisation contracted to 20% from 36% during the period. Over 90% of revenue comes from cruise ticket sales. Passenger load factor moderated to 85% in FY26 after improving from 78.5% in FY24 to 91.6% in FY25. Since fuel costs account for 17-20% of revenue, fluctuations in fuel prices may pressure margins, as the company may not be able to fully pass on increases through ticket pricing.Valuation
Considering the post-IPO equity and net profit for FY26, the company seeks a steep price-earnings (P/E) multiple of up to 112. It does not have a direct Indian-listed peer. The company has given a mix of hotel and entertainment peers, which have P/E between five and 41, which includes companies such as Taj GVK Hotels & Resorts, Juniper Hotels, Samhi Hotels, Lemon Tree Hotels and Wonderla Holidays.

Renewable energy player Kotyark Industries and auto component manufacturers ZF Commercial Vehicle Control Systems India have fixed Wednesday (June 24) as the record date for their respective bonus issues in the ratio of 10:1 and 5:1, effectively making today the last date for investors to buy the shares of the companies to be eligible for the bonus shares.

Only shareholders who hold the shares in their demat accounts as of Wednesday will be eligible to receive the bonus shares. Due to SEBI’s T+1 settlement norm, investors must purchase the company’s shares at least one trading day before the record date so they are credited to their demat accounts by that date and qualify for the corporate action. This effectively makes today the final day for investors to buy the shares to be eligible for the bonus issue.

All about Kotyark Industries bonus issue

Kotyark Industries earlier this year announced its plan to issue 10.28 crore bonus shares with a face value of Rs 10 each. Every shareholder who owns one share of the company as on the record date will get 10 bonus shares as part of the offer.

This marks the company’s first ever bonus issue. Kotyark Industries is engaged in the manufacturing of biodiesel and its by-products, and is one of the key players across Rajasthan. The company focuses on green energy and sustainable development of renewable resources (biofuel) through the adoption of environmentally friendly technology.

Also read: Dividends & bonus issues | LIC, Asian Paints among 35 stocks turning ex-record date this week. How many do you own?Kotyark Industries shares rallied around 12% on Monday. The stock has gained 9% in one week and is overall up 87% in 2026 so far. The shares of the company jumped 35% in one year but fell nearly 6% in three years. It has a market capitalisation of Rs 458 crore.

All about ZF Commercial Vehicle Control Systems bonus issue

ZF Commercial Vehicle Control Systems India announced in May that it plans to issue bonus shares in the ratio of 5:1, which means that shareholders will get 5 bonus shares for every share held in the company as on the record date. This is the first bonus issue announced by the company.

ZF Commercial Vehicle Control Systems India is associated with advanced and conventional braking systems, along with related air assisted technologies and systems in India. The Chennai-headquartered company has five manufacturing facilities, an advanced technology development center, a vehicle testing facility and a nation-wide aftermarket distribution and services network.
The shares of the company declined over 1% on Monday, but gained over 3% in one week, 5% in one month and 6% in 2026 so far. In the longer term, the stock jumped 18% in one year, 27% in three years and 124% in five years. The company has a market capitalisation of nearly Rs 30,000 crore.

Also read: Bajaj Auto nears record date for Rs 5,633 crore share buyback at 19% premium. Should you participate?(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

By Jennifer Nash

Our global markets watchlist tracks nine prominent indexes from economies around the world. The list includes the S&P 500 from the United States, TSX from Canada, the FTSE 100 from England, the DAXK from Germany, the

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Jivial Industries’ SME IPO will open for subscription on Tuesday, with the grey market indicating a subdued listing. The company’s shares commanded a grey market premium (GMP) of 0% ahead of the issue, suggesting no expected listing gains at current levels.

The BSE SME issue will close on June 25, while the shares are scheduled to list on July 1. The IPO is priced at Rs 196 per share and comprises a combination of a fresh issue worth Rs 26.65 crore and an offer for sale (OFS) of Rs 5.34 crore, taking the total issue size to Rs 31.99 crore.

Retail investors can bid for a minimum of 1,200 shares, requiring an investment of Rs 2.35 lakh.

Aluminium railing manufacturer

Incorporated in 2021, Jivial Industries manufactures aluminium railing systems and architectural fixtures used in residential and commercial buildings. Its product portfolio includes handrails, spigots, brackets, locks, endcaps, bends, jointers and other aluminium fittings used for balconies, glass partitions, façades and viewing windows.

The company caters to construction firms, architects, interior designers, fabricators and glass solution providers across India, with a strong presence in Gujarat, Maharashtra and Chhattisgarh. It also exports a small portion of its products to Oman.

Jivial operates a manufacturing facility in Rajkot and plans to establish a second unit to expand production capacity and strengthen backward integration through aluminium extrusion.

Use of IPO proceeds

The company plans to utilise the fresh issue proceeds to purchase new machinery, renovate its manufacturing facility, meet issue-related expenses and for general corporate purposes.

Financial performance

For the nine months ended December 2025, Jivial Industries reported revenue of Rs 12.2 crore and profit after tax of Rs 2.95 crore. For FY25, the company posted revenue of Rs 12.07 crore and net profit of Rs 2.97 crore, while maintaining a relatively low debt level of Rs 1.23 crore.

With the GMP at zero, the grey market is not pricing in listing gains at present. Investors may therefore focus on the company’s long-term growth prospects and execution of its expansion plans rather than short-term listing expectations.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)