Bajaj Finance, Bajaj Housing, Shriram Finance top NBFC picks for 2026; mid & smallcaps may see consolidation: Deven Choksey

Deven Choksey, Managing Director at DRChoksey FinServ Pvt Ltd, expects the Indian equity market to enter 2026 on a strong footing, supported by earnings visibility and reasonable valuations in select segments. In an interaction with Business Today on Wednesday, the market veteran said the market remains attractive from a valuation standpoint and that large-cap opportunities look favourable.

"Market for its own terms I think is not expensive, which is an excellent proposition," he said, adding that India steps into 2026 "with a great amount of profits."

2025 takeaways: Stretched valuations

Reflecting on 2025, Choksey noted, "Investors who have invested, I think probably have not ended up losing the capital even though they may not have won a significantly large amount of return to the markets."

According to him, the major learning was the disconnect between growth expectations and actual performance in the mid- and small-cap space.

Mid and smallcaps: Selective approach advised

The expert expects mid- and small-cap indices to move into a consolidation phase rather than another year of momentum.

"In general, most of the mid-caps and small-caps are still valued fairly rich. They are quoting at 60 times, 70 times, 100 times, kind of a price-earnings (P/E) ratio even today," he said. Choksey added that valuations leave room for price correction, particularly where growth visibility remains limited.

He expects selective opportunities but cautioned that "this is going to be a year for mid-cap and small-cap or more or less a consolidation year. It is not going to be a momentum year or another boom year."

IT outlook: AI transition to support growth

From the technology sector, Choksey believes large-cap IT firms could deliver steady gains as AI-led transformation takes centre stage.

"Some of the large-cap IT companies have ended up shifting their entire activity spectrum to the AI way of working. Customers are also developing a newer budget for the new year, in which they are going to place larger orders," he said, projecting 15–20 per cent appreciation in frontline names such as TCS and Infosys over the next year.

NBFC picks: Bajaj Finance, Bajaj Housing & Shriram Finance

Choksey remains positive on non-banking financial companies (NBFCs), placing Bajaj Finance, Bajaj Housing Finance and Shriram Finance at the top of his preference list.

"Bajaj Finance remains the top pick. This company is championing this model through the use of AI now in bringing the customer onto their platform," he said.

He expects housing credit demand to remain strong. "If the third company has to be given the preference, it would be Bajaj Housing Finance. Housing as a sector is going to grow significantly."