Key Points

Asset management firm PL Wealth, in the report maintained a positive outlook on Indian equities for the long term but advised caution in the short term due to tariff uncertainties and foreign portfolio investor outflows.

Strong domestic fundamentals supported the positive view as the firm highlighted that India's growth is intact, as Q1 FY26 gross domestic product rose 7.8 per cent year-on-year (YoY), aided by front-loaded government capital expenditure and a favourable deflator.

PL Wealth said that the GST rationalisation is expected to boost growth by 0.2-0.3 per cent, support consumption, and ease inflationary pressures.

CPI inflation dropped to a 97-month low of 1.55 per cent in July, creating policy space for rate cuts, and services activity also remains robust, with the Services PMI at a 15-year high of 62.9 in August, the report noted.

PL Wealth recommends prioritising large-cap exposure and using staggered entries to manage timing risks in the short term (1-3 months). In the medium term, if volatility stabilises, opportunities in mid- and small-cap stocks may emerge, as well as in sectors driven by domestic demand, including consumption, infrastructure, and retail, it noted.

"Disciplined, long-term investors should use volatility to build exposure to quality companies, while fixed income and precious metals provide tactical opportunities in the current environment," said Inderbir Singh Jolly, CEO, PL Wealth.

It maintained neutral stance on fixed income, with a positive bias towards long-term investments such as G-Secs and SDLs. Short-tenor AAA corporates remain preferred for accrual, while credit risk appetite stays muted, the report said.

PL Wealth forecasted the rupee is expected trade between 87.5 and 88.5 in the short term and stabilise around 86 to 88 in the medium term. However, it cautioned that further tariff escalation could drive the currency towards 90/USD.

- IANS