Finance | Large Caps Show Stronger Margin of Safety in 2026: SBI Fund Manager

Main investment shift confirmed

Anup Upadhyay of SBI Mutual Fund significantly increased the large-cap allocation in the SBI Flexi Cap Fund to 70% by late January 2026, noting that large-cap stocks currently offer a greater margin of safety over mid- and small-cap assets.

Key details on portfolio rebalancing

The updated portfolio structure highlights a conscious move towards stability and capital preservation. In an interview with Mint, the Fund Manager emphasized that while mid and small-cap segments experienced robust growth in preceding periods, current valuations suggest limited potential upside and increased susceptibility to volatility, thereby diminishing the traditional margin of safety.

This active rebalancing of the SBI Flexi Cap Fund—a vehicle designed to move capital across market capitalization levels based on economic cycles and valuation assessments—underscores a defensive outlook. The current strategy prioritizes established market leaders with resilient earnings profiles and strong balance sheets that characterize the large-cap index.

• Allocation Change: Large-cap weighting moved sharply upward from 55% to 70% over the 12-month period ending January 2026.
• Market View: The fund manager’s commentary signals caution regarding broader market valuations, especially outside the top 100 stocks.
• Focus: Emphasis remains on structural themes and businesses demonstrating long-term competitive advantages, irrespective of short-term macroeconomic noise.

Why this matters

For investors, this directional shift from one of India’s largest fund houses serves as an important indicator of professional sentiment regarding risk-adjusted returns in the near term. A preference for large caps typically suggests expectations of tempered overall market returns and a focus on quality earnings. This strategy helps insulate capital from potential sharp corrections often witnessed in the broader market, which disproportionately affect smaller companies during periods of tightening liquidity or economic uncertainty.

The commentary also prompts retail investors to review their own exposure levels, especially if their portfolios have become overly concentrated in high-flying mid and small-cap stocks following recent market rallies. Flexibility in capital allocation, as demonstrated by the SBI Flexi Cap Fund, is crucial for navigating complex market phases.

Sectoral Observations and Future Bets

While the overall strategy favors safety, specific sectoral bets underpin the 70% large-cap positioning. Structural changes driving long-term growth—including digitalization, industrial expansion, and certain areas of financial services—remain key areas of interest for the SBI Flexi Cap Fund. The fund manager reportedly favors companies that are beneficiaries of multi-year infrastructure investment cycles and stable consumption patterns, focusing on businesses that can reliably deliver earnings growth regardless of minor economic headwinds.

The heightened focus on large caps suggests that the fund is positioning itself for a potentially slower but more stable growth environment where market share concentration favors established leaders. Future rebalancing into mid or small caps will depend heavily on a significant correction in those indices that makes their valuations compelling once again, restoring the required margin of safety.

People also ask

What defines a “margin of safety” in equity investing?

The margin of safety is an investment principle popularized by value investors like Benjamin Graham. It refers to the difference between the intrinsic value of a stock and its current market price. A larger margin indicates that the investor is buying the asset for significantly less than it is fundamentally worth. When fund managers state that large caps have a better margin of safety, they imply that these stocks are trading closer to or below their calculated long-term intrinsic value relative to mid or small caps, which may be trading at inflated or demanding multiples.

How does the SBI Flexi Cap Fund strategy differ from a standard large-cap fund?

A standard large-cap fund must allocate at least 80% of its assets to large-cap stocks, following strict regulatory definitions. In contrast, a flexi-cap fund, such as the one managed by SBI Mutual Fund, is permitted to dynamically shift its equity allocation across large-cap, mid-cap, and small-cap stocks without any minimum restrictions for specific market segments. This freedom allows the fund manager, Mr. Upadhyay, to aggressively increase or decrease exposure based purely on valuation attractiveness and risk assessment, enabling the 70% large-cap concentration observed in 2026.