Axis MF's Shreyash Devalkar sees broader market consolidation, stock-specific gains driving current cycle

Shreyash Devalkar, Head of Equity at Axis Mutual Fund, which manages assets worth $38.57 billion, said the ongoing market trend reflects a broader phase of consolidation rather than a broad-based uptrend across sectors. He noted that while the broader indices have corrected 4–6% from recent peaks, the real story lies in how few stocks are delivering positive returns.

“If you notice, in the large caps, broadly 30–35% of stocks are positive. In mid and small caps also, that ratio is somewhere around 35%,” Devalkar said. “It’s not just about headline-level market consolidation; it’s about how only a few stocks are doing well.”

He added that such consolidation was expected, especially after a strong rally had pushed valuations to elevated levels.

“When the multiples are at 50–60–70–80 times earnings, the room for error is very low,” he said. “In that situation, companies find it difficult to outgrow nominal gross domestic product (GDP), especially when global and domestic growth forecasts remain in the 6–6.5% range.”

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Looking at recent earnings, Devalkar said the trends in mid and small caps remain largely unchanged. Some sectors, such as electronics manufacturing and services, continue to maintain momentum. However, capital goods have started showing concentration.

In contrast, he sees stable performance in consumption-related sectors such as travel and tourism, hospitals, and quick commerce. “There aren’t too many disappointments in these segments so far,” he said. However, he pointed out that auto and high-end discretionary consumption have slowed, and there’s little evidence of a recovery.

On the infrastructure side, Devalkar highlighted a pattern.

“Historically, the market distinguishes between asset owners and capital goods companies. Asset owners are balance-sheet heavy, and their growth depends on capital and liquidity,” he said, explaining why valuations and stock behaviour differ across infrastructure players.

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Commenting on IT stocks, he said that while valuations may look attractive, the sector faces internal challenges.

Devalkar added that this internal rotation is also creating divergence in strategy. Some IT firms are chasing growth using margins or balance sheet strength, while others are focusing on free cash flow and profitability. This is creating visible differences in stock performance within the sector.

For the full interview, watch the accompanying video

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