Motilal Oswal Private Wealth recommends a 50% portfolio allocation to Indian mid- and small-cap stocks, citing 32% Q1 earnings growth. The firm suggests this domestic-focused strategy provides a buffer against the high volatility currently impacting global tech-heavy markets like South Korea.
Motilal Oswal Private Wealth has maintained an aggressive stance on India’s smaller stocks in its latest 'Alpha Strategist' report for August 2026. The firm continues to advise a 50% allocation to mid- and small-cap equities, expressing confidence in the earnings growth potential of this segment, which posted a 32% increase in the first quarter of the fiscal year.
The firm argues that India’s economic drivers remain largely insulated from the turbulence affecting overseas markets. This outlook contrasts sharply with the recent decline in South Korea’s KOSPI index, which suffered a major downturn due to a collapse in leveraged positions related to semiconductor and AI stocks. According to Motilal Oswal, the Indian market is better protected because 78% of the revenue generated by companies within the MSCI India index comes from domestic sources, reducing the impact of global liquidity shocks.
Macroeconomic Stability and Asset Shifts
The Reserve Bank of India’s (RBI) recent decision to keep the repo rate steady at 5.25% has provided a sense of stability to the domestic economic environment. With the central bank maintaining a positive outlook by projecting GDP growth at 6.7% for the current fiscal year and lowering inflation forecasts to 5.0%, the firm views the macroeconomic backdrop as supportive of growth.
Given this environment, the report advises investors to move away from traditional long-term bond investments, often called duration plays, which can be sensitive to interest rate changes. Instead, the firm is shifting its preference toward private credit, high-yield non-convertible debentures, and infrastructure investment trusts, known as InvITs, to capture better yields.
Gold Over Silver
In the commodities space, the firm continues to favor gold over silver. While silver has seen price gains, analysts note that the metal is highly sensitive to global industrial cycles, which poses a risk if global demand slows down. Gold, by contrast, is seen as a defensive asset. Its price has risen to $4,400 per ounce, supported by increased buying activity from central banks during the second quarter of 2026.
While the firm maintains a growth-oriented view, investors should note that mid- and small-cap stocks carry higher volatility than large-cap companies. The strategy relies on sustained domestic economic health, so the primary risks to track include fluctuations in global oil prices, geopolitical tensions, and the impact of the monsoon season on rural demand and inflation. If inflation pressures were to rise unexpectedly, it could force the central bank to change its policy stance, which would be an important factor for market participants to monitor.