Peak market returns a thing of past: Aditya Birla Sun Life AMC's Patil

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. He advocates for a focus on sectors with steady growth and clear visibility in the current scenario and is positive on banking, automobiles, industrials, consumer discretionary, information technology, and healthcare as areas for investment. The surge in small and mid-cap investments might moderate due to recent regulatory concerns, Patil told Mint.

He expects large caps to outperform midcaps and smallcaps going forward. Edited excerpts from an interview: We expect a rate-cut cycle in India to begin in the first half of the next calendar year, though it may be a shallower one. With the fiscal deficit in check and about $30 billion flows in government bonds from foreign investors as a result of inclusion in JP Morgan bond indices, the 10-year G-sec yield is expected to bottom out at 6.5% in the coming year.

We also expect inflation to behave with core inflation at recent lows. Thus, it would pay to dial in duration and for higher returns in bonds and tactically increase allocation as the risk-reward is reasonably attractive compared to other asset classes. Given that the relative valuation of large caps is attractive compared to mid- and small-cap and the fact that the market cap share of large caps is at a historic low, there is a case for mean reversion.

The over-exuberance in small and midcaps leading to large inflows in this category of funds is also likely to moderate after the recent concerns raised by the regulator and making mutual funds provide more disclosure to make investors aware of the risks. Hence, outperformance of large caps over mid and small caps is likely going forward. We are positive on sectors like banking, autos, industrials, consumer discretionary, technology and healthcare.