Beyond the Nifty slump: Sandeep Bagla on why largecap valuations are ripe for comeback in 2026

As the Nifty grapples with stagnation driven by sluggish banking and IT heavyweights, a quiet shift is underway. In this exclusive interview, Sandeep Bagla, CEO of TRUST Mutual Fund, reveals why corrected largecap valuations present a prime entry point for 2026. Discover how their new Large & Mid Cap Fund strategically captures this structural pivot toward quality bluechips.

Edited excerpts:

What are the core strategic reasons behind launching the TRUSTMF Large & Mid Cap Fund at this specific juncture in 2026, and how does it fit into the broader product suite of TRUST Mutual Fund?

We launched the TRUSTMF Large & Midcap Fund to offer a disciplined core equity solution that captures both the resilience and stability of large cap stocks and their earnings, and the growth potential and higher earnings trajectory of mid-caps stocks. The valuations of heavyweight large cap sectors like banking and IT have corrected to comfortable levels, while the mid cap universe has shown exceptional earnings in the recent past. The fund is aimed at an investor who is looking for steady growth combined with some upside potential.

The fund mandate requires a minimum allocation of 35% each to large-cap and mid-cap companies. How do you view the current valuation dynamics between these two segments, and where do you see the maximum opportunities for alpha generation?
The fund will invest a minimum of 35% in large caps and midcaps each and will invest some of its residual portion in small caps as well. At TRUST MF, we believe India is a long term growth story and few sectors and companies will always provide attractive investment opportunities. We expect alpha from active sector weightages and bottom up stock selection more in mid and small cap space. Sector weightages can make a big difference in large caps whereas stock selection can generate alpha in mid and small caps. Our research revealed wide dispersion in performance of stocks in large and mid cap space which strengthens the case for better performance through active stock and sector selection.


The residual portion of the scheme allows up to a 30% allocation to other market caps, including small-cap companies. Considering the current market volatility, what is your view on the small-cap space right now, and how much exposure can investors expect the fund to take in small caps?
Small caps remain an ocean of opportunities in India. In a 5 year period between 2020 and 2025, we saw 3 stocks move from small caps to large caps and 43 stocks moved from small caps to mid caps generating 108% CAGR & 58% CAGR respectively. Given our growth focus, one can expect a around 15% allocation in small caps as well. Our fund managers are seeing multiple credible growth opportunities in the Indian stock market today.


Given the recent rally in mid and small-cap stocks, how do you view the current risk-reward profile of the large-cap segment, and are we seeing a sustainable rotation back to quality blue chips?
We saw a moderation in earnings trajectory in the large cap space in the last couple of years due to multiple factors like commodity inflation, general moderation in growth etc. The valuations in large cap space have come down quite a bit and now we believe it could be a good entry point for investors with a medium term horizon as earnings outlook is improving and investor concerns subside.

Your core stock selection philosophy emphasizes identifying "Megatrends" and evaluating the "Longevity of the business model". Could you share some insights into the key megatrends your investment team is currently tracking for portfolio construction?
At TRUST MF, we give importance to longevity of growth of companies as it aids the compounding of returns as well. If a sector/ segment is in a long term megatrend, it ensures the growth of the companies associated with the sector. For example, a megatrend we are going through now is the move of investor preference from savings in fixed deposits to equities. Companies in the financial markets, especially capital markets have benefitted disproportionately from this Megatrend. Stocks of brokers, wealth managers, asset managers, depositories, stock exchanges, and other service providers have all outperformed smartly.

We believe a few Megatrends like physical asset creation e.g. manufacturing, Data centres, defense etc, technological innovation, premiumization of consumption have a long runway of growth as the economy grows and the per capita GDP increases over the next few years.

Nifty's underperformance is largely due to poor performance from large private banks and IT stocks. In such a situation, how are you positioning your portfolio?

We have been underweight on large IT companies and banks in our portfolios given their low growth profile and high valuations. We have been more constructive on capital market players and the mid sized niche IT or technology related companies which are growing faster. However, we do believe now that the banking system is likely to see improved liquidity and better margins due to recent measures on the foreign deposits and ECB changes, going forward.

Which are the investing themes you are bullish on from a 5-year view?
We believe that the Indian economy will keep growing steadily and for a long period of time due to structural factors like the favourable demographic profile of our population. We are estimated to add 20% of the global working age population in the years to come. As people earn more, they will consume more, invest more and the companies serving them will benefit significantly and generate significant returns for their investors. We believe that growth investing is likely to be rewarding and we are currently favourably inclined towards themes like financialization of savings, premium consumption, infrastructure creation, defence, and technological innovation.