Motilal Oswal Private Wealth Maintains Mid and Small-Cap Overweight Stance as FII Inflows Return

Motilal Oswal Private Wealth (MOPW) has retained its overweight allocation to mid and small-cap stocks in its August 2026 Alpha Strategist report, titled 'Clearing Skies.' The firm's portfolio allocation remains structured at 40 percent hybrid and large-caps, 10 percent global equities, and 50 percent mid and small-caps.

The report highlights that foreign institutional investors turned net buyers of Indian equities in July 2026 for the first time in four months, registering net inflows of $2.5 billion. Concurrently, the Nifty 50 rose 2.2 percent month-on-month to close at 24,384 in July, marking its first close above the 24,000 threshold in five months, although the index remains down 6.7 percent for the calendar year to date. Earnings performance for Q1FY27 among Nifty 50 companies grew 11 percent year-on-year, outperforming the 7 percent estimate, while small-caps led with the strongest growth at 32 percent against a 26 percent estimate.

Addressing market stability, MOPW contrasted India's market dynamics with South Korea’s KOSPI, which fell approximately 40 percent from its June 2026 peak following the unwinding of a leverage-driven rally in AI-linked semiconductor stocks. The firm noted that India remains structurally insulated from such leverage-driven shocks, pointing out that 78 percent of MSCI India revenues are generated domestically, and 66 percent of the Nifty 500 market capitalisation sits in domestic-facing sectors.

Regarding monetary policy, the Reserve Bank of India kept its repo rate unchanged at 5.25 percent with a neutral stance during its August meeting. The central bank raised its FY27 GDP growth forecast to 6.7 percent while trimming its CPI inflation projection to 5.0 percent. The 10-year government securities yield has eased to approximately 6.75 to 6.80 percent, with MOPW expecting yields to stay range-bound between 6.6 percent and 6.9 percent. The firm continues to favor accrual strategies, directing 55 to 60 percent of fixed income allocations toward performing credit, private credit, high-yield NCDs, and InvITs.

In commodities, gold rallied to around $4,400 per ounce in early August, rising about 9 percent since late July due to a near five-fold increase in central bank purchases between Q1 and Q2 2026. Silver rebounded to roughly $66 per ounce, gaining about 14 percent over the same period. MOPW maintains a neutral overall allocation to precious metals but prefers gold over silver, noting silver's higher sensitivity to global industrial cycles.

For deployment strategy, the firm recommends lump-sum deployment in hybrid strategies and a staggered approach for pure equity strategies, advising that market corrections be utilized for accelerated allocation.

"The findings from Motilal Oswal Private Wealth highlight the underlying resilience of the Indian market, driven largely by robust domestic revenues and stabilizing macroeconomic indicators like controlled inflation and steady GDP growth. For entrepreneurs and investors navigating the current economic environment, maintaining a balanced portfolio strategy while recognizing structural strengths against external volatility is crucial for long-term value creation." — Dr. Shishir Gupta, Founder & CEO, StartupLanes