Motilal Oswal Private Wealth has increased its recommended portfolio allocation for mid and smallcaps to 50% in its July 2026 report, citing attractive valuations and high exposure to growth sectors. According to the firm's latest Alpha Strategist July 2026 report titled "The Changing Formation," the suggested portfolio allocation now stands at 40% hybrid or large caps, 50% mid and smallcaps, and 10% global exposure. This marks a 10-percentage point increase in the mid and smallcap allocation from earlier recommendations. The wealth management firm maintains a neutral stance on overall equities while advising a flexible, actively managed investment approach. As per The Economic Times, Sandipan Roy, Chief Investment Officer at Motilal Oswal Private Wealth, explained that the firm has increased its overweight to mid- and small-caps given their stronger representation in high-growth, new-economy sectors and the improvement in valuations. The approach remains disciplined with lump sum deployment in hybrid strategies, staggered allocation in pure equity, accrual-focused fixed income, and gold as the core precious metals holding.
Recent market data reveals strong performance in small-cap funds, with around 21 equity mutual funds delivering over 20% XIRR on SIP investments over the past year, according to ETMutualFunds analysis. Small-cap funds dominated the top performers, with the top seven funds all belonging to the category and five generating over 30% XIRR. Bank of India Small Cap Fund topped the rankings with a 39.08% XIRR, turning a ₹10,000 monthly SIP into around ₹1.43 lakh. However, experts advise diversified equity fund investments to mitigate concentration risk, with investors considering SIPs for rupee cost averaging during market fluctuations.
Indian stock markets experienced sharp losses for a fifth consecutive session on Friday, with Sensex and Nifty indices seeing significant drops amid investor concerns. Oil prices exceeding $100 per barrel and FII selling fueled the downturn, with broader markets and specific sectors registering substantial declines. This selloff erased over ₹3 lakh crore from market capitalization, highlighting the current market volatility that investors must navigate while maintaining their long-term investment strategies. However, recent developments show Indian stocks and currency surged significantly on Monday after crude oil prices collapsed, with the BSE Sensex and NSE Nifty both seeing substantial gains, reflecting renewed investor confidence.
For hybrid strategies, Motilal Oswal Private Wealth 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. Roy noted that meaningful corrections could be entry points for aggressive exposures, as the broader market presents attractive opportunities as market breadth improves and leadership broadens beyond benchmark constituents. The firm's approach reflects improving FII preference for manufacturing-led small and midcap opportunities, with FII flows rotating away from benchmark-heavy sectors such as Financials, IT, FMCG and autos towards industrial and manufacturing themes like capital goods and metals, which have higher mid and smallcap representation. The midcap and smallcap universe represents a wider cross-section of India's capex cycle, extending well beyond pharmaceuticals to capture hospitals, diagnostics, biotechnology, CDMO, medical devices and healthcare technology, which are high growth areas.
Regarding bond investments, Motilal Oswal Private Wealth continues to recommend accrual-oriented strategies across the credit spectrum as the core allocation, with income-generating assets such as InvITs, arbitrage funds, and conservative SIF strategies as complements to core allocation. The firm noted that RBI's calibrated measures to support capital inflows, along with lower crude oil prices, have helped stabilise domestic bond markets and moderate government bond yields to 6.7-6.8%. However, it expects yields to remain broadly range-bound, while not ruling out the possibility of periodic volatility from geopolitical developments or inflation risks. Gold and silver prices have significantly declined after reaching peaks earlier this year, with experts suggesting this correction is a normalisation after excesses and not a long-term trend reversal, as long-term fundamentals for both metals remain intact.
