Motilal Oswal Private Wealth suggests active management and raises allocations to Small & Mid-Caps
Motilal Oswal Private Wealth’s latest Alpha Strategist July 2026 report, titled “The Changing Formation”, highlights that several long-standing market relationships are undergoing change; a stronger US dollar is no longer weighing consistently on emerging markets, and US equity gains are broadening beyond a handful of large technology stocks. The most significant shift during June month had come from crude oil, which corrected sharply by around 30% before stabilising, easing inflationary pressure, strengthening India's external account, and pulling domestic bond yields lower. With economic cycles turning shorter and sector leadership rotating faster, the report suggests that investors need a more flexible and actively managed approach to portfolio construction.
In this context, Motilal Oswal Private Wealth maintains a neutral stance on Indian equities overall, while raising its overweight position on mid and small caps. The suggested portfolio allocation is 40% hybrid/large caps, 50% mid and small caps, and 10% global exposure; a 10-percentage point increase in the mid and small cap allocation from earlier. The report further highlights that Mid and small caps carry higher exposure to high-growth sectors such as capital goods, manufacturing, renewables, and healthcare compared to the Nifty 50, and that valuations have improved meaningfully over the past 18 months. For hybrid strategies, it recommends lump sum deployment at current levels, while pure equity-oriented strategies should be staggered given prevailing uncertainties, with any meaningful correction used as an opportunity for more aggressive deployment.
In fixed income, report notes that RBI's calibrated measures to support capital inflows, together with lower crude oil prices, have helped stabilise domestic bond markets and moderate government bond yields to ~6.7-6.8%. But it expects yields to remain broadly range-bound, while not ruling out the possibility of periodic volatility from geopolitical developments or inflation risks.Motilal Oswal Private Wealth continues to recommend accrual-oriented strategies across the credit spectrum as the core allocation, and income-generating assets such as InvITs, arbitrage funds, and conservative SIF strategies as complements to core allocation.On precious metals, the firm remains neutral, with gold as the preferred core holding given continued central bank buying and its role as a currency and geopolitical hedge, while silver – supported by strong industrial demand and a persistent supply deficit – warrants only measured, selective exposure given its higher volatility.
Commenting on the outlook, Mr. Ashish Shanker, MD & CEO, Motilal Oswal Private Wealth, said, "The macroeconomic landscape in India is turning distinctly favorable, the sharp drop in crude oil during June eased inflationary pressures and pulled domestic bond yields lower. Further, shorter economic cycles, faster change in sector leadership, and greater return dispersion are reshaping investment opportunities. Much like a football manager who adapts formations to opponent or changing match conditions, investors also need to embrace "The Changing Formation" by adopting greater flexibility and agility in portfolio construction. Active management is increasingly becoming more critical to capture emerging sources of alpha.”
Sandipan Roy, Chief Investment Officer, Motilal Oswal Private Wealth, said, “As market breadth improves and leadership broadens beyond benchmark constituents, the broader market presents attractive opportunities. We have increased our overweight to mid and small caps given their stronger representation in high-growth, new-economy sectors and the improvement in valuations. Our approach remains disciplined: lump sum deployment in hybrid strategies, staggered allocation in pure equity, accrual-focused fixed income, and gold as the core precious metals holding, building portfolios resilient enough to adapt as market conditions change.”
In such times, Strategic Asset Allocation anchored in your Investment Charter acts as the compass and guiding light for investors to maintain a disciplined commitment to their long-term objectives.
Above views are of the author and not of the website kindly read disclaimer
