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Continue to focus on Multi cap and select Mid & Small cap strategies across MF/PMS/AIF platforms

Mumbai : The Alpha Strategist by Motilal Oswal Private Wealth (MOPW) highlighted the bias towards Multi cap and select Mid & Small cap strategies across MF/PMS/AIF platforms. Motilal Oswal’s proprietary Temperature Gauge Index indicates that Equity market is in fair zone and close to the cheap valuation zone. For incremental investments, MOPW continues to suggest 50% deployment immediately & 50% to be staggered over 3-6 months while being able to accelerate deployment during sharp corrections.

Key Insights:

* The strategy for Equity is to invest 50% deployment immediately & 50% to be staggered over 3-6 months while being able to accelerate deployment during sharp corrections.

* 70% - 80% of the portfolio should be invested in high quality (G-Sec/SDL/AAA equivalent) accrual strategies through a combination of short term and medium term maturity portfolio (currently not beyond 2027 maturity) with a minimum investment horizon of 3 yrs.

Markets witnessed significant volatility in May on the back of continuing macro risks of Russia-Ukraine war, QE reversal and supply chain disruptions due to Covid restrictions in China, fueling uncertainty. While there have been calls for a diplomatic solution the current redlines laid out by both sides seem incompatible. Across the Atlantic, markets are now pricing in another set of sequential hikes in June and July after witnessing a 50 bps hike in May '22. Fed's tone evolved over the month. Initially Chairman Powell adopted a more hawkish tone stating the Fed wouldn't hesitate to raise rates beyond neutral and signaling that it was willing to accept an increase in the unemployment rate from its historically low 3.6% to achieve its inflation target. Headline inflation came in above expectations but fell marginally to 8.3% YoY.

Indian equities also followed its global peers. A strong rally towards the last week of the month restricted Nifty 50 fall to 2.7% in May. However, this was not the case for broader markets as they experienced sharp correction. Nifty Midcap 150 and Nifty Small Cap 250 were down by 5.3% & 8.6%, respectively. Export ban on wheat, followed by a sharp export duty on steel dented sentiments, as investors started to speculate more such measures across other sectors too. RBI's out of turn 50 bps rate hike also dented sentiments. During the month, FII selling continued as they pulled out another ~USD 4.9 bn while domestic institutions remained net buyers with a flow ~USD 6.1 bn.

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