'It's time to increase allocations to the mid- and small-cap segment'

Over the past year, Kotak Mutual Fund's equity schemes have been among the best performers in their respective categories. Kotak Standard Multicap Fund, which manages a mammoth Rs 29,000 crore of assets, highlights how the fund house has won investor trust. We speak to Harsha Upadhyaya, CIO - Equity, Kotak Mutual Fund, about the reasons for his funds' success. He also talks about the current valuations of Indian equities, recovery in mid and small caps, and his favourite sectors and themes. The equity markets have done fairly well this year, but the economy has not. What's your view on the valuations of Indian equities? Most of the recent high-frequency data points have been suggesting a continuing sluggish economy. However, large-cap indices, such as Nifty and Sensex, have been trading near all-time highs. This sort of dichotomy between the economy and the stock market is baffling investors and financial advisors. However, if you look deeper, the ill-effect of a slowing economy is evident in the mid- and small-cap basket. While the mid-cap index is more than 20 per cent below its earlier high, the small-cap index is over 40 per cent below its earlier peak. As we look back, the current