India's benchmark indices may be going nowhere fast, but beneath the surface, a very different story is playing out, one where selective investors in small and midcap stocks are quietly generating significant alpha.

That is the core message from Ashish Chaturmohta, Managing Director of Portfolio Management Services at JM Financial, who laid out a detailed market roadmap for the months ahead.

Also Read

Light at the end of the tunnel? Equities have delivered over 10% returns 85% of the time when invested over 7 years

Largecaps: Range-bound and under pressure

Talking to ET Now, Chaturmohta's said, the Nifty is unlikely to break out meaningfully in the near term. A cocktail of rupee weakness, elevated crude prices, persistent inflation, and global rate hikes is keeping institutional appetite suppressed.

How should investors rebalance portfolios overloaded with smallcap and thematic funds? Here’s the ideal allocation strategy

"Markets are going to trade in a broader range between 23,000 at the lower end to 24,500 on the higher side," he said.

The downside, however, appears well-cushioned. Crude has already pulled back after touching near ₹110 levels, and the rupee's sharp decline is largely priced in. Should West Asia tensions ease, a swift rally toward 24,500 is plausible, but Chaturmohta cautions it would likely be short-lived without a decisive return of Foreign Institutional Investors (FIIs).

"Till the time FIIs do not come back into the market, a lot of these largecap names are going to see underperformance," he warned. Among the exceptions: ICICI Bank and Axis Bank, both of which are showing early signs of a reversal and could see meaningful upside in the near term.

Where Chaturmohta is actually putting money to work

The real conviction, he says, lies in three thematic pockets — each backed by structural demand and strong earnings momentum.

1. CDMO pharma: The quiet compounder

Contract Development and Manufacturing Organisations (CDMOs) within the pharmaceutical space are seeing a surge in global outsourcing demand. Companies such as Laurus Labs, Biocon, Navin Fluorine, and Sai Life Sciences are front and centre here. The operating leverage being built as order books fill up makes this one of the highest-conviction themes for medium-term investors.

2. Capital markets: A structural re-rating in progress

Exchanges like BSE and MCX have been hitting fresh all-time highs, but the opportunity extends well beyond the exchanges themselves. Asset managers, wealth platforms, and brokers are equally compelling. Angel One stands out: with roughly 18–19% market share in both cash and derivatives segments, a recently launched mutual fund business, and its wealth management arm Ionic gaining traction, Chaturmohta sees a meaningful re-rating case building for the stock.

3. Capital goods: Order books full until 2030

The electrification and energy transition wave has created a multi-year runway for capital goods manufacturers. Siemens Energy, Hitachi, and GE Vernova have order books extending to 2030, virtually guaranteeing strong topline growth visibility. CG Power adds an additional dimension, its semiconductor optionality sits alongside its transformer business, giving it a dual-engine growth profile.

BHEL, meanwhile, is showing strong price stability and renewed interest among institutional investors.

The bottom line: Chaturmohta's framework is clear: avoid the noise in largecaps, stay patient on FII flows, and focus capital on thematic small and midcap opportunities where earnings upgrades are still underway.

"It is more stock-specific and thematic opportunities which look very promising at the current juncture," he said.

In a market where direction remains uncertain, that kind of precision, rather than broad index bets, may well be the defining edge for investors in the quarters ahead.