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 Weak (low growth plus low quality) mid Caps and small Caps are in bubble zone and caution is advised. Strong (high growth plus high quality) Mid Caps and Small Caps present an opportunity for long term investors, says Vinay Paharia, CIO, PGIM India Mutual Fund in a research.

"On a relative top-down basis we are finding better upside in large-caps stocks versus mid-caps and small-cap stocks," the note said.

"We remain optimistic on Indian equity markets on medium to long term driven by strong economic growth. However, post the sharp runup in markets in the recent months, we are cautious on the near-term return potential of the equity markets," the note said.

"Globally we are seeing growth slow-down in developed markets due to elevated interest rates along coupled with sticky inflation situation. This will have an adverse impact of export oriented businesses in India," the note said.

In India rural consumption continues to remain weak and Government measures to boost the same is key near-term monitorable. On an overall basis we are positively biased towards domestic oriented industries and are selective on the export oriented industries, it said.

Dovish US FED statement on incremental rate hikes has boosted the global investor sentiment, while the recent BJP win in the three state elections has given a boost to the domestic investor sentiment as it indicates increased probability for political continuity in 2024.