ETMarkets Smart Talk: A further 8-10% correction could bring large caps to fair valuation: Sahil Kapoor of DSP MF

equity allocation might be warranted, signalling a shift away from the conservative stance that high valuations previously dictated,” says Achin Goel, PMS Fund Manager at Bonanza Group.

In an interview with ETMarkets, Goel said: “A further price correction of about 8–10% from early March 2025 levels, or sequential earnings growth reflected in EPS increases—or a combination of both—could bring large caps into fair value territory,” Edited excerpts:

The month of February started on a volatile note with Budget 2025; since then, we have been on a losing streak. The index fell nearly 6% in February – the worst monthly decline since Covid 2020 rout. What is your take on markets?
Indian markets have been trading at historically expensive valuations, a trend we have highlighted in various publications, including DSP Netra.

Valuations had stretched significantly beyond their long-term averages, with much of the optimism driven by expectations of a sustained 20%+ earnings CAGR.

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However, this paradigm has shifted as earnings growth has slowed, leading to a de-rating process that is gradually removing the froth from valuations.

Within the large-cap universe, parts of the market are already trading below their long-term averages.

These segments now appear attractive when evaluated against their growth prospects and financial health. In contrast, many small- and mid-cap stocks remain overvalued and still need to correct further to reach fair valuation levels.

This de-rating phase represents a healthy