The recent stock market correction, influenced by geopolitical tensions, has led to top Nifty stocks being valued at the 17th percentile. Despite substantial FII selling amounting to $12.7 billion, large-cap stocks have shown resilience, creating potential buying chances, as per a report by DSP Mutual Fund.
The report highlighted that the ten largest Nifty stocks have remained strong even with the significant FII selling in March 2026, displaying stability in trading activities without major disruptions. It suggests that it is a suitable time to gradually increase equity exposure, especially in large-cap stocks, as markets transition from expensive to fairly valued zones.
With the Nifty’s trailing price-to-earnings (P/E) ratio dropping below 20 times and estimated to be under 19 times based on Q4FY26 projections, the report indicates that valuations are nearing long-term averages. However, it notes that markets are not yet inexpensive, with fair value ranging between 16.5x to 18x, positioning current valuations between ‘fair and average.’
The report advises investors to adopt a phased approach to augmenting exposure, emphasizing that making additional investments during market declines allows for accumulation at more favorable prices. It also points out that the rise of the volatility indicator, India VIX, above 25 points signifies heightened fear levels, often associated with potential market bottoms.
Market breadth indicators reveal oversold conditions, with only 18% of Nifty 500 stocks trading above their 200-day moving average and a mere 13% above the 50-day average. The report suggests that historically, foreign inflows tend to resume when valuations become reasonable and macroeconomic concerns are largely factored in.
