WhiteOak Bullish on India's Small and Mid-Cap Stocks

WhiteOak Capital Sees Sweet Spot in Indian Small and Mid-Cap Stocks

Singapore-based WhiteOak Capital's emerging markets CIO Hiren Dasani says India’s small- and mid-cap stocks are entering a sweet spot, driven by stronger earnings, price corrections, and improving valuations compared to large-caps.

Structural Themes Drive Opportunity

According to Dasani, the real opportunity lies in companies tied to powerful structural themes such as manufacturing, supply-chain diversification, defense, energy infrastructure, and AI-linked global capex, which are better represented in the broader market.

Market Divergence and FPI Outflows

In 2026, while the Nifty 50 and Sensex have dropped 8.3% and 10.5%, small- and mid-cap indices have gained 2.6% and 2.2%. Foreign portfolio investors have offloaded $23.86 billion in Indian equities, surpassing last year's record outflows. Dasani views this selling as a valuation reset rather than a rejection of India’s fundamentals.

Domestic Inflows Remain a Key Support

Record buying by domestic mutual funds in small- and mid-caps in April continues to support these segments. WhiteOak notes that India’s 10–12% earnings growth outlook remains intact, though investors are reassessing it against improving earnings visibility in other emerging markets like Korea and Taiwan, fueled by AI-led capex.

Sectoral Preferences and Fund Exposure

WhiteOak favors industrials, manufacturing, and select financials, citing strong momentum in engineering firms, auto ancillaries, and capital-goods companies with multi-year growth visibility. Opportunities are also seen in non-banking financial companies, MSME lenders, and microfinance firms where credit costs appear to have peaked. The fund is cautious on IT services due to AI-driven pricing pressure.

WhiteOak Capital manages $11.23 billion globally, with 40% allocated to India. Its flexi-cap, multi-cap, and special opportunities funds manage ₹79.07 billion, ₹34.21 billion, and ₹15.39 billion respectively.