59% of Large & Midcap Stocks Are 20% Below Their Peaks: Here's What That Actually Means

Nearly 6 out of every 10 stocks in India's large and midcap universe are trading more than 20% below their all-time highs. That's not a crash headline, that's the entry-point argument an entire fund category is now being built on.

This blog breaks down the findings of a new Abakkus Mutual Fund study on the large & midcap segment, what the data actually says, and what investors should keep in mind before acting on it.

What's Driving the Case for Large & Midcap Funds?

1. The correction has reset prices across the board

According to the Abakkus study, around 59% of stocks in the large & midcap universe are trading more than 20% below their record highs after the recent correction. For long-term investors, drawdowns of this size across a majority of the universe typically mean valuations are more reasonable than they were at the peak, though a lower price alone doesn't make a stock cheap.

2. Earnings have grown, prices haven't

The study points to a clear disconnect: over the last two years, large and midcap companies delivered 14–16% earnings growth, while their stock prices rose only 1–2%. When profits grow faster than prices for an extended period, valuations compress. Abakkus argues this gap could close over time through mean reversion, prices catching up with fundamentals, as markets enter what it calls an earnings-driven phase.

3. Stock selection is becoming the real differentiator

Around 103 companies, roughly 48% of the large & midcap universe, have delivered more than 20% CAGR over the last five years, per the study. Put differently, nearly half the universe compounded strongly while the other half didn't. That kind of dispersion means which stocks a fund owns matters far more than whether it owns the category, the study's core argument for active management.

4. The category covers most of the market by design

Largecap and midcap companies together account for nearly 79% of India's listed market capitalisation. Under SEBI's categorisation rules, large & midcap funds must hold at least 35% each in largecap and midcap stocks, a structure that forces a blend of established market leaders and faster-growing mid-sized businesses in a single fund.

The Study at a Glance

Things to Keep in Mind

• Consider the source. The study comes from Abakkus Mutual Fund, which has filed an offer document with SEBI for its own Large & Mid Cap Fund. That doesn't make the data wrong, but it does mean the study supports a product the fund house is preparing to sell.
• "Below the peak" is not the same as "undervalued." A stock 20% off its high may simply have been overpriced earlier, or its fundamentals may have genuinely deteriorated. The drawdown stat says nothing about individual stock quality.
• Mean reversion is a tendency, not a schedule. The earnings–price gap can persist for years or close through earnings slowing down rather than prices going up.
• Dispersion cuts both ways. If 48% of the universe compounded at 20%+ CAGR, the other 52% didn't. Active selection can add value here, or subtract it, if the fund manager picks from the wrong half.
• The 35/35 rule leaves 30% to discretion. Two large & midcap funds can behave very differently depending on where the manager deploys the remaining portion.

The Bottom Line

The data makes a reasonable case: valuations have cooled, earnings have outpaced prices, and the large & midcap universe offers wide dispersion for active managers to exploit. But this is a fund house's own study, released ahead of its own fund launch in the same category. Treat the numbers as a starting point for research, not a signal to act, and if you do consider the category, evaluate the specific fund and manager, not just the argument.