India's large-cap stocks are positioned to narrow their underperformance relative to smaller peers, according to market strategists. The rebound is expected to be driven by three key factors: the return of foreign investors, an improving earnings outlook, and attractive valuations.

Foreign portfolio investors have begun returning to Indian equities after a period of sustained outflows, providing crucial support for large-cap names. This shift comes as global risk appetite improves and investors reassess emerging market allocations.

Earnings momentum is also turning favorable, with Nifty 50 companies showing signs of stabilizing profitability. Valuation metrics remain compelling compared to historical averages and regional peers, offering a margin of safety for investors.

Strategists note that while small- and mid-cap segments have outperformed recently, the large-cap space offers better liquidity and governance standards, making it a preferred destination for returning institutional capital.