Key Points
- Lump-sum deployment is suggested for hybrid strategies, while equity-oriented strategies should use a staggered approach.
- SMIDs have outperformed large caps since the start of the Middle East conflict, showing relative resilience.
- Interest rates are expected to stay elevated due to RBI's pause and global inflation risks from oil prices and currency volatility.
New Delhi, May 30. Due to India’s macroeconomic resilience, a neutral stance on Indian equities is warranted, with a relative 'overweight' stance on mid and small caps, a report has said.
The report from Motilal Oswal Private Wealth recommended a portfolio allocation of roughly 50 per cent hybrid or large caps, 40 per cent small and mid-caps (SMIDs) and 10 per cent global exposure.
The firm recommended lump-sum deployment in hybrid strategies and a staggered approach for pure equity-oriented strategies.
While Indian capital markets have underperformed several global peers in the near term, the broader domestic macroeconomic backdrop remains resilient, the report said, adding that small and mid-caps (SMIDs) have demonstrated relative resilience, outperforming large caps by a significant margin since the beginning of the Middle East conflict.
Portfolio Allocation Strategy Advised
On fixed income, the report said interest rates are likely to remain elevated for longer with the RBI signalling a pause in the rate‑cut cycle and global inflation risks resurfacing amid elevated oil prices and currency volatility.
The firm continued to suggest cash-flow focused accrual strategies across the credit spectrum, while cautioning that any renewed pressure on crude prices or rupee may push bond yields higher again.
Further, it maintained a neutral allocation stance on precious metals – gold and silver – with more weight towards gold, supported by continued central bank buying and easing speculative excess in global gold markets.
Fixed Income Outlook amid Global Risks
“Global markets in 2026 are increasingly being shaped by AI-led earnings and infrastructure cycle, with technology heavy economies such as South Korea and Taiwan leading the upcycle, while India continues to demonstrate resilience through its strong domestic macroeconomic fundamentals," said Ashish Shanker, MD and CEO, Motilal Oswal Private Wealth.
India faced pressure from geopolitical uncertainty, elevated crude prices, slower earnings momentum, and the absence of large direct AI-linked plays, but fundamentals remain resilient, supported by healthy GDP growth, stable inflation, strong forex reserves and improving corporate balance sheets.
Record GST collections, resilient urban demand and signs of rural recovery continue to reinforce confidence in India’s long-term consumption and investment-led growth story, Shanker added.
—IANS
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