Mumbai: Brokerage Bernstein said it may be time to "buy the dip" in India and start with large-cap, quality and defensive stocks. The firm said it may be too early to buy small- and mid-cap stocks citing valuations, peaking earnings and record investor participation.Bharti Airtel, Maruti Suzuki India, Avenue Supermart (Dmart), Reliance Industries, Axis Bank, IndusInd Bank, Larsen & Toubro, TCS, NTPC and Power Grid Corp are among the large-cap stocks in its buy list."Since last month, while all (investment) styles have underperformed, high momentum/high vol/low quality have been the worst performers down 15% while defensives gave a bit of protection and were down 1%," said Bernstein in a client note. "The record valuations, declining earnings and record crowding still make momentum, high vol and SMIDs (Small and Mid Caps) vulnerable."Bernstein said the Indian stock market's stretched valuations have always been a challenge. The MSCI India index's estimated Price to Earnings (PE) ratio - a popular valuation measure - fell to 22.6 times from 23.4 after the recent market decline. "....it is nowhere close to levels where valuations could provide initial support," said the firm.MSCI India trades at a 58% premium to emerging markets against 53% in September, it said."Earnings have also been deteriorating for the last few months - India is now seeing a record downgrade cycle, even exceeding the levels seen in Covid," said Bernstein. "All sectors in India are either seeing negative revisions or earnings missing expectations. The downgrade cycle has hit even the tech where the pace of upgrades is declining."The brokerage said the pace of foreign portfolio outflows has slowed in the past two weeks, which could continue. "However, a strong comeback of FIIs is unlikely in the near term," said Bernstein.