ITC, HDFC Bank, ONGC shares: Greater fool theory at play; explaining investor apathy towards largecaps

Kotak Institutional Equities in a strategy note said it finds significant value in many largecap stocks following a sharp price and time correction over the past few months. Yet, it feels that such value buys may languish for a while despite stocks trading at attractive valuations and offering large potential upsides to their fair values. This is even as there is no macroeconomic crisis.

"We attribute this serendipitous development (for patient investors) to (1) the market’s compulsion for ‘perfect’ timing in the relative NAV ‘game’ and (2) the shift in investment behavior of large parts of the market to largely momentum investing (aka the greater fool theory) at the expense of value investing. We would clarify that we mean price-value gap and not low multiples necessarily by value investing," it said.

It gave three examples to make its point clear.

HDFC Bank Ltd
Kotak said HDFC Bank trades at more or less ex-growth multiples despite delivering 10 per cent earnings per share growth compounded annually (CAGR) over FY2024-26 with expectation of 12 per cent EPS CAGR over FY2026-2029. It expects HDFC Bank to deliver 15.1 per cent return on equity (RoE) over FY2024-26 and 14.2 per cent RoE over FY2026-29. Kotak said HDFC Bank's recent strong performance is seen despite external and internal challenges.

ITC Ltd

Kotak said ITC Ltd is trading at 10.4 times one-year forward EPS of the tobacco business, adjusting for the value of the non-tobacco FMCG and other businesses and cash.

ONGC Ltd

Kotak said ONGC stock is trading at 4.4 times FY2027 EPS and 4.5 times FY2028 EPS and the stock has refused to budge despite crude prices moving sharply higher in the past few weeks.

"It is indeed remarkable that ONGC stock is 17 per cent below pre-war levels despite crude prices rising 70 per cent over this period. The government has not changed the pricing or taxation regime for upstream oil and gas production despite widespread fears of the government imposing windfall tax at higher crude oil and gas prices," Kotak said.

ONGC shows the movement in ONGC stock price and Dated Brent crude oil price from February 28, 2026.

"In addition, Oil India, ONGC’s much smaller midcap. counterpart, is up 13 per cent in the past month, while ONGC is down 3 per cent over the same period. This discrepancy shows the acute apathy among investors for large-cap. stocks and exuberance (rational or irrational only time will tell) around midcap stocks," Kotak said.