360 ONE’s Mayur Patel Favors Smallcaps Over Midcaps

Mayur Patel, President and Fund Manager for listed equity at 360 ONE Asset, views smallcap stocks as offering a superior risk-reward profile compared to midcaps, which he considers relatively expensive. The 360 ONE Flexicap Fund has notably adjusted its portfolio in response to these valuations.

• Smallcap allocation increased to 26% from 14% since early 2026.
• Largecap exposure was selectively trimmed following market corrections.

The fund employs a bottom-up, market-cap agnostic investment strategy, with a core focus on India’s burgeoning manufacturing growth narrative. This approach guides their sector-specific allocations.

Manufacturing Growth Fuels Sector Bets

Patel expresses strong optimism for sectors poised to benefit from India’s manufacturing push and the broader, indirect effects of artificial intelligence. He identifies specific areas ripe for long-term growth.

• Electronics manufacturing
• Power transmission and distribution (T&D)
• Renewables manufacturing
• Defence

Data centers emerge as a significant second-order beneficiary of AI, with substantial capacity growth and investment projected over the next five to seven years. This expansion is expected to generate opportunities in related infrastructure, including T&D equipment, cables, wires, diesel gensets, and renewable energy equipment.

Market Valuation & Earnings Outlook

Examining the broader market, Patel suggests the Nifty’s current price-to-book ratio, positioned around its 20-year median, presents a reasonable entry point for investors. He foresees a robust earnings recovery.

• Nifty 500 earnings rebound anticipated in the second half of FY26.
• Key drivers include crude oil prices, credit growth, consumption, and capital expenditure.

The flexicap category, when genuinely managed with a flexible allocation strategy, holds the potential to significantly outperform the Nifty, according to Patel. The fund remains prepared to book profits if risk-reward dynamics become unfavorable.