Mumbai, April 17 (NationPress) The latest dip in the stock market, driven by geopolitical uncertainties, has led to top Nifty stocks reaching the 17th percentile in valuations, even amidst a substantial $12.7 billion in FII selling. This indicates the robustness of large-cap stocks and potential investment opportunities, according to a recent report.

A study conducted by DSP Mutual Fund highlighted that despite the massive FII outflow in March 2026, the leading ten stocks in the Nifty have demonstrated remarkable stability, showing no major disruption in trading or increased transaction costs.

The report suggests that it is an opportune moment to gradually enhance equity exposure as the market transitions from overvalued to fair valuation, particularly focusing on large-cap stocks.

“Valuations are nearing historical averages, especially with the Nifty below 22,300. It's wise to incrementally increase equity allocations while the market experiences downturns and approaches fair value,” stated the report.

The Nifty's trailing price-to-earnings (P/E) ratio has dipped below 20 times, projected to fall under 19 times based on Q4FY26 estimates, aligning closely with its long-term average of 18.9 times.

Nonetheless, the report pointed out that markets are not yet at attractive price levels, with fair value estimated between 16.5x to 18x, indicating that current valuations lie between ‘fair and average’.

Investors are encouraged to adopt a phased strategy for increasing exposure, as making incremental investments during market declines allows for better price accumulation.

It also highlighted that the rising India VIX above 25 points indicates a period of increased market anxiety, which often correlates to potential market bottoms.

Moreover, market breadth indicators reveal oversold conditions, with only 18 percent of Nifty 500 stocks trading above their 200-day moving average and a mere 13 percent above the 50-day average.

Historically, foreign investments tend to rebound when valuations become favorable and macroeconomic concerns are largely accounted for, as per the report.

Additionally, it mentioned improving macroeconomic signals, such as the Indian rupee nearing weaker real effective exchange rate (REER) levels, which could facilitate future capital inflows.

However, the report advised caution regarding small and mid-cap (SMID) stocks, noting that while their valuations have moderated, they remain high compared to large caps and may face further corrections. It recommended exposure to SMIDs through Systematic Investment Plans (SIPs) and active fund managers focused on quality and valuations.

Sector-wise, segments with high Return-on-Equity (ROE), such as FMCG, IT, oil and gas, and consumer durables, are starting to present value opportunities following a period of underperformance, while cyclicals have experienced considerable re-rating despite weaker long-term fundamentals.

The report also observed that extended declines in the market often precede substantial recoveries. Historically, instances of four or more consecutive months of decline in the Nifty have been infrequent but have yielded average returns exceeding 40 percent in the subsequent year.

“The primary challenge for investors lies in behavior, not analysis. Opportunities are apparent during such periods, yet acting on them proves challenging,” it concluded.