ET Intelligence Group: After a lacklustre performance in 2023, the index heavyweights of the Nifty 50 index could be back in the spotlight, thanks to investors seeking a margin of safety as little value appears to be left in the market, both in terms of top-down and bottom-up outlook.Mega stocks such as HDFC Bank, Reliance Industries, ICICI Bank, Infosys, TCS, Axis Bank and Kotak Mahindra Bank, which collectively account for 48% of the total Nifty 50 weightage, have given return of 9.58% in 2023 compared with the Nifty 50’s return of 20%.The share of these stocks in India’s total market capitalisation fell to 23.3% in December 2023, a drop of 300 basis points in one year. This is also reflected in the fact that the share of ‘A’ shares in the total capitalisation dropped to a multi-month low of 91.93% in December 2023.The market has started to sense growing opportunity from price divergence between mega-cap stocks and their small-cap counterparts in the fag-end of year. No wonder, the Nifty 50 index rose 8% in December – its best monthly performance in nearly 15 months – and outperformed small-cap companies.This is a sharp contrast to the full year performance where mid- and small-cap stocks rose by an average of 47% and 56%, respectively.106428594The Nifty 50’s gain in 2023 is primarily driven by the cumulative contribution of the lower weightage stocks, barring L&T and ITC.In 2024, the stocks that offer valuation comfort, possibility of earnings upgrade and have not seen a massive rally in 2023 are likely to attract more attention from investors.Given that mega-cap stocks offer all three characteristics could be on investors’ radar. The average P/E of the mega-cap stocks trading at 20.96 times of the one-year forward is close to the Nifty 50’s 20.19. This implies a P/E premium of just 3% compared with 15% at the start of 2023. The valuation of mega-cap stocks is in line with the Nifty 50 index. There are some triggers for mega-cap stocks. For instance, the capex intensity of RIL will drop after three years of higher capital spending, mainly led by telecom expenditure. The company has guided that net debt will remain less than the operating profit from 2024 and spending will be lower than the annual free cash flow generated.Similarly, HDFC Bank has one of the best credit underwriting matrices in the system and consistently gained market share over a long period. The stock is trading at 2.2 times of its book value compared with the long-term average of 3.7.