Finance | SBI Fund's 2026 Shift: Why Large Caps Are a Safer Bet Now

SBI Fund Manager Signals Major 'Risk-Off' Shift to Large Caps

MUMBAI – Anup Upadhyay, a senior fund manager at SBI Mutual Fund, on January 29, 2026, revealed a significant defensive pivot, stating that large-cap stocks currently offer a greater “margin of safety” than their mid and small-cap counterparts. This strategic move is highlighted by the SBI Flexi Cap Fund's increased allocation to large caps, which has surged to 70% from 55% just a year ago, signaling a cautious outlook on prevailing market valuations.

The Strategic Pivot in the SBI Flexi Cap Fund

The tactical reallocation within the SBI Flexi Cap Fund, one of the country's prominent diversified equity schemes, represents a deliberate move to de-risk the portfolio. Upadhyay's comments, made in an interview with Mint, underscore a growing concern among institutional investors about potentially stretched valuations in the broader market, particularly within the mid and small-cap segments that have seen remarkable rallies over the past few years.

Why Large Caps Offer a Better 'Margin of Safety'

The term “margin of safety,” popularized by legendary investor Benjamin Graham, refers to purchasing securities at prices sufficiently below their intrinsic value to protect against downside risk. In the current context, SBI Mutual Fund's strategy implies that large-cap companies, characterized by stable earnings, robust balance sheets, and established market leadership, are trading at more reasonable valuations relative to their growth prospects compared to smaller companies. This shift aims to cushion the portfolio against potential market volatility and corrections.

• Valuation Concerns: After a prolonged bull run, price-to-earnings (P/E) ratios for many mid and small-cap stocks have expanded significantly, raising questions about their sustainability.
• Regulatory Scrutiny: Recent advisories from the Securities and Exchange Board of India (SEBI) have highlighted concerns about “froth” and speculative interest in smaller stocks, prompting asset managers to adopt more prudent risk management.
• Earnings Stability: Large-cap firms typically exhibit more predictable earnings growth and resilience during economic downturns, offering a defensive advantage.

Market Outlook and Key Sectoral Bets

While detailing the shift in market-cap allocation, Upadhyay also provided insights into his broader market outlook and preferred sectors. The fund's increased exposure to large caps likely favors sectors known for stability and long-term growth potential. These typically include leading private sector banks, information technology (IT) services giants, and consumer staples companies. Such sectors are often seen as beneficiaries of India's long-term structural growth story while providing a buffer against short-term economic headwinds.

What This Means for Retail Investors

The commentary from a key decision-maker at India's largest asset management company serves as a crucial indicator for the broader market. For retail investors, this development suggests a time for careful portfolio review. The move by the SBI Flexi Cap Fund does not necessarily mean an imminent market crash but rather highlights a professional assessment that the risk-reward balance has tilted in favor of larger, more established companies. Investors may consider if their own asset allocation aligns with their risk tolerance in light of these expert opinions.

Answering Key Investor Questions

What is a flexi cap fund?

A flexi cap fund is a type of mutual fund that can invest across companies of any market capitalization—large, mid, or small. As per SEBI regulations, these funds must invest a minimum of 65% of their total assets in equity and equity-related instruments, but unlike other category-specific funds, the fund manager has the flexibility to shift allocations between market caps based on their market outlook.

Why is SBI Mutual Fund's move significant?

As the largest Asset Management Company (AMC) in India, SBI Mutual Fund's strategic decisions are closely watched. A significant reallocation in one of its flagship funds, like the SBI Flexi Cap Fund, can influence market sentiment and reflects the deep research and risk assessment of a major institutional player.

Are mid and small caps a bad investment now?

Not necessarily. This move is about relative valuation and risk. Mid and small-cap stocks can still offer superior long-term growth potential. However, Upadhyay's stance suggests that at current prices, the potential for price correction or volatility is higher in these segments, and the margin of safety is lower. The key is selective stock picking and aligning investments with one's own risk appetite.