Indian equities are undergoing a structural shift toward an earnings-driven market, with meaningful opportunities surfacing at the individual stock level across large-, mid- and small-cap segments, according to a report released on Friday, 9 October 2026 by Abakkus Mutual Fund. The fund house urges investors to look past aggregate index valuations and focus on company-specific fundamentals.

Beyond Headline Valuations

While broad index valuations suggest the market is expensive, Vaiibhavv Chugh, CEO of Abakkus Mutual Fund, highlights a significant dispersion within individual indices. According to the report, roughly 45 per cent of stocks in the midcap index are currently trading below 30 times earnings, while around 40 per cent trade above 40 times — underscoring that sweeping conclusions based on index-level price-to-earnings ratios can mislead investors.

The report recommends assessing earnings growth, addressable market size, PE ratios and a business's capacity to sustain growth in tandem before drawing conclusions on a stock's potential. This bottom-up approach, the fund argues, reveals pockets of value that top-down screens routinely miss.

Near-Term Volatility vs Long-Term Opportunity

The fund house flagged that current knee-jerk market reactions — triggered by macro headwinds — represent potential missed opportunities over a four- to five-year horizon. Chugh elaborated on this view, saying: 'Ultimately, stock price return is equal to the earning growth, which has stayed consistent for the past 30–40 years, and earnings growth has roughly replicated nominal GDP growth.'

This comes amid a complex macro backdrop: recent geopolitical developments, elevated crude oil prices, US interest rates and currency movements are seen as sources of near-term volatility. However, the report notes that company-specific earnings resilience will matter more once these external factors stabilise — a view that positions patient, stock-selective investors advantageously.

Emerging Sectors Driving New Opportunities

The report cites several high-growth themes as increasingly relevant to India's economic trajectory, including electric vehicles (EVs), cyber security, wealth management, asset management and medical tourism. Notably, many of the companies operating in these spaces are currently classified as small- or micro-cap firms, which Abakkus views as an opportunity as these sectors evolve alongside rising per-capita incomes.

This aligns with a broader pattern seen in India's equity market over the past decade, where early-stage sector themes — from IT services in the 1990s to consumer finance in the 2010s — delivered outsised returns to investors who entered when the businesses were still sub-scale.

India's Macro Foundation Remains Intact

Despite pockets of market weakness, the report affirms that India's economic resilience continues to support the long-term growth thesis. Earnings across several sectors remain healthy, and macroeconomic indicators — including GDP growth, per-capita income and industrial production — continue trending in the right direction, the fund noted.

With the next round of quarterly earnings expected to provide fresh data points, stock-level differentiation is likely to sharpen — making the fund's bottom-up approach increasingly timely.