Deven Choksey backs Adani Energy for 2026 flags valuation risk in mid and small caps
Market veteran Deven Choksey sees a structural opportunity emerging in India’s power transmission space, naming Adani Energy as a long-term beneficiary of rising electricity demand. At the same time, he cautions that richly valued mid-cap and small-cap stocks may face a prolonged consolidation phase before the next market leadership shift.
By Finblage Editorial Desk
11:52 am
24 December 2025
Veteran market expert Deven Choksey, Managing Director at DRChoksey Finserv, has outlined a clear and somewhat divergent market strategy for investors looking ahead to 2026. Speaking to CNBC TV18, Choksey combined selective optimism on specific large-cap opportunities with a broader note of caution on segments where valuations appear to have run ahead of fundamentals.
Indian equity markets have delivered strong returns over the past few years, with mid-cap and small-cap stocks significantly outperforming large-caps. This rally has been driven by domestic liquidity, improved earnings visibility, and optimism around India’s long-term growth trajectory. However, this outperformance has also led to elevated valuations in several pockets of the market, raising concerns about sustainability.
Against this backdrop, Choksey’s commentary reflects a growing view among seasoned investors that the next phase of the market may look materially different from the recent past, with leadership potentially rotating back to large-cap stocks anchored in visible cash flows and long-term demand drivers.
Choksey identified Adani Energy as a key long-term investment idea, particularly for investors with a 12- to 36-month horizon. His conviction is rooted in the structural growth expected in India’s power and power ancillary sectors, with a specific emphasis on transmission and distribution (T&D).
According to Choksey, the T&D segment is entering a phase of accelerated capacity addition, driven by rising electricity consumption, renewable energy integration, and the need for grid modernisation. Adani Energy’s expanding transmission portfolio positions it to benefit directly from this trend, as new capacity additions translate into regulated returns and predictable cash flows over time.
In contrast, Choksey struck a cautious tone on the broader mid-cap and small-cap universe. Rather than flagging individual stocks, he pointed to a thematic risk: valuations in these segments are, in many cases, significantly higher than what their projected growth rates can comfortably justify.
Choksey’s assessment matters because it highlights a potential inflection point in market leadership. If mid-cap and small-cap stocks enter a consolidation phase, even without a sharp correction, relative performance could shift meaningfully in favour of large-cap names with strong balance sheets and long-duration growth visibility.
For the power sector, the emphasis on transmission is particularly relevant. While generation often attracts more attention, transmission assets tend to offer stable, regulated returns with lower earnings volatility. As India scales up renewable capacity and electrification, transmission networks become a critical bottleneck—and therefore a strategic investment area.
While Choksey’s comments are investor-driven rather than policy-led, they align with broader government priorities. India’s policy focus on renewable energy expansion, grid reliability, and nationwide electrification implicitly supports long-term investment in transmission infrastructure. This policy backdrop reduces regulatory uncertainty for large transmission operators and strengthens the investment case for players expanding capacity in this space.
From a market perspective, a period of consolidation in mid-cap and small-cap stocks could take two forms, as Choksey suggests. If not a sharp price correction, it could manifest as a “time correction,” where prices remain range-bound for 12 to 18 months while earnings catch up with valuations.
Such a phase would likely redirect incremental capital towards large-cap stocks, especially those linked to infrastructure, energy, and core industrial themes. Choksey expects large-caps to dominate market performance leading into 2027, though he does not rule out selective opportunities in smaller companies with strong execution and reasonable valuations.
For Indian investors, this implies that portfolio construction may need to tilt away from broad-based exposure to mid- and small-caps and towards more selective, fundamentals-driven positioning.
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This article is compiled from publicly available information, including company disclosures, stock exchange filings, regulatory announcements, and reports from global and domestic financial publications. The content has been editorially reviewed and enhanced by the Finblage Editorial Desk for clarity and investor awareness purposes only.
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