The brokerage has been cautious on the mid- and small-cap space for the last three to four months, and following the recent rally, it believes that mega-cap stocks are also no longer value propositions.
"Rollover to December quarter and 2X increase in multiple factoring in lower macro uncertainty following rate cut path laid out by US Fed lead to 9-16% increase in FVs for IT stocks," Kotak said in a note
The midcap and smallcap stocks have seen a strong rally over the last six months and have outperformed the headline Nifty50 index. While the Nifty Midcap 100 and Nifty Smallcap 100 have given returns of over 27% and 40%, respectively, over the last six months, the returns by Nifty have been at 8%.