"Skies Are Clearing" for Indian Equities, Maintains Overweight on Mid & Small Caps - Motilal Oswal Private Wealth
UdaipurTimes, Mumbai, 28 August, 2026: Motilal Oswal Private Wealth's latest Alpha Strategist report for August 2026, titled "Clearing Skies," notes that several of the headwinds weighing on Indian equities over the past year notably FII selling, rupee pressure, capital flowing toward the AI-led US and North Asian rally and muted earnings momentum have begun to ease.
The report points to South Korea's KOSPI, which corrected roughly 40% from its June peak within weeks after a leverage-fuelled rally in AI-linked stocks unwound, as evidence that concentrated, momentum-driven markets carry risks India has largely avoided. With nearly 78% of MSCI India revenues domestically generated and 66% of Nifty 500 market cap in domestic-facing sectors, the firm believes India is relatively insulated should the global AI trade reverse further.
At home, RBI measures have strengthened dollar liquidity and supported INR stability. Domestic markets reflected this improving backdrop in July: The Nifty 50 rose 2.2% month-on-month to close at 24,384, its first close above 24,000 in five months, even as it remains down 6.7% for CY26 year-to-date. Sector leadership reversed sharply, with IT rebounding 17% after being the weakest performer in June. FIIs turned net buyers with inflows of USD 2.5 billion in July, the first month of net buying after four consecutive months of selling - while Q1FY27 corporate earnings came in ahead of expectations, with Nifty 50 earnings growing 18% YoY against a 10% estimate.
Motilal Oswal Private Wealth maintains a neutral stance on Indian equities overall while retaining its overweight on mid and small caps, keeping portfolio allocation unchanged at 40% hybrid/large caps, 10% global exposure, and 50% mid and small caps. The firm continues to recommend lump-sum deployment in hybrid strategies and a staggered approach for pure equity strategies, with any sharp correction to be used for accelerated deployment.
On fixed income, the RBI kept the repo rate unchanged at 5.25% with a neutral stance, raising its FY27 growth forecast to 6.7% and trimming its inflation projection to 5.0%. The 10-year G-Sec yield has softened to 6.75–6.80%,near pre-US–Iran war levels. The firm continues to prefer accrual strategies over duration, favouring performing and private credit, high-yield NCDs, and InvITs, complemented by arbitrage funds, hybrid SIFs, and conservative equity savings funds.
On precious metals, the firm remains neutral overall but biased toward gold over silver. Gold has rallied to around USD 4,400/oz in early August, up roughly 9% since end-July, supported by a five-fold jump in central bank purchases between Q1 and Q2 2026. Silver has also rebounded to around USD 66/oz, up about 14% over the same period, though its higher industrial sensitivity warrants a more measured allocation.
Sandipan Roy, Chief Investment Officer, Motilal Oswal Private Wealth: “The recent correction in Korea highlights the risks that can emerge when market performance becomes concentrated around a narrow set of global sectors and leveraged positions. The defining feature of India’s equity market today is the breadth of its growth drivers. Domestic consumption, investment, financial deepening, and manufacturing push are emerging as multiple engines of growth, making the market less dependent on any global cycle. This breadth gives us greater confidence in the underlying opportunity, particularly across mid and small caps, where higher earnings growth , and a stronger domestic backdrop are supporting the investment case, while staying disciplined on accrual in fixed income and gold as our core precious metals holding."
Disclaimer: This is a Sponsored Post produced from a report by Motilal Oswal Private Wealth and is not written by UdaipurTimes. Readers are advised to use their discretion as this is not an investment advisory.
