Indian mid, small caps 'overweight' due to macroeconomic resilience: Report
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.
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.
"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
Reader Comments
Interesting perspective from an Indian wealth firm. Moving from global markets, I see India as a bright spot. But 50% in hybrids and large caps seems conservative—given the resilience, why not more aggressive on mid caps? Still, the staggered approach for equity makes sense in this uncertain global environment.
As someone who invests regularly, I appreciate the cautious optimism. The 40% SMID allocation seems high given current valuations, but the macroeconomic fundamentals are strong. I'll stick to my SIPs in mid-cap funds and maybe add a bit more. No rush—steadiness wins the race. 🐢
Good analysis but I'm wary of the 'overweight' on mid and small caps—many retail investors got burned in the correction last year. The fundamentals are fine, but valuations are stretched in some pockets. Better to stick with large caps and hybrids for safety. 😅
The report's recommendation seems well-balanced—50% large/hybrid, 40% SMIDs, 10% global. With India's macro resilience and the AI-linked tech gap, I'm not convinced on the global exposure. Why not go more into domestic mid caps? But overall, a sensible play. India's economic story is compelling.
Love seeing this confidence in India's markets! With record GST collections and rural recovery, the long-term story is strong. I'm already 35% in mid caps through mutual funds—this report reassures me to hold on. Let's hope crude prices stay stable though! 🙏
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