Indian mid, small caps ‘overweight’ due to macroeconomic resilience: Report

NEW DELHI: Due to India’s macroeconomic resilience, a neutral stance on Indian equities is warranted, with a relative 'overweight' stance on mid and small caps, a report has said.

The report from Motilal Oswal Private Wealth recommended a portfolio allocation of roughly 50 per cent hybrid or large caps, 40 per cent small and mid-caps (SMIDs) and 10 per cent global exposure.

The firm recommended lump-sum deployment in hybrid strategies and a staggered approach for pure equity-oriented strategies.

While Indian capital markets have underperformed several global peers in the near term, the broader domestic macroeconomic backdrop remains resilient, the report said, adding that small and mid-caps (SMIDs) have demonstrated relative resilience, outperforming large caps by a significant margin since the beginning of the Middle East conflict.

On fixed income, the report said interest rates are likely to remain elevated for longer with the RBI signalling a pause in the rate‑cut cycle and global inflation risks resurfacing amid elevated oil prices and currency volatility.

The firm continued to suggest cash-flow focused accrual strategies across the credit spectrum, while cautioning that any renewed pressure on crude prices or rupee may push bond yields higher again.

Further, it maintained a neutral allocation stance on precious metals – gold and silver – with more weight towards gold, supported by continued central bank buying and easing speculative excess in global gold markets.