Motilal Oswal Private Wealth keeps overweight mid-cap Stance as FIIs return to Indian markets

Motilal Oswal Private Wealth (MOPW) has kept its overweight position in mid and small-cap stocks in its latest Alpha Strategist report for August 2026, titled "Clearing Skies." The firm maintains a 40% allocation to hybrid/large caps, 10% to global equities, and 50% to mid and small caps. Foreign institutional investors (FIIs) turned net buyers of Indian equities in July 2026 for the first time in four months, injecting a net inflow of $2.5 billion.

Despite the Nifty 50 rising 2.2% month-on-month to close at 24,384 in July, the index is still down 6.7% for the year to date. Nifty 50 companies' Q1FY27 earnings grew by 11% year-on-year, with small-caps leading the growth at 32%, beating estimates by 26%. MOPW contrasts this performance with South Korea's KOSPI, which fell around 40% after a leverage-driven rally in AI-linked semiconductor stocks, with leveraged ETFs collapsing from around $50 billion to $17 billion.

India, according to MOPW, is structurally insulated from such scenarios, as 78% of MSCI India's revenues are domestically generated, and 66% of Nifty 500 market capitalization is in domestic-facing sectors. The Reserve Bank of India kept the repo rate unchanged at 5.25% at its August meeting, with a neutral stance, raised FY27 GDP growth forecast to 6.7% and trimmed CPI inflation projection to 5.0%.

MOPW expects yields to remain between 6.6% and 6.9% and directs 55-60% of fixed income allocations towards performing credit, private credit, high-yield NCDs, and InvITs. The firm keeps a neutral stance on commodities, favouring gold over silver due to silver's sensitivity to global industrial cycles. MOPW recommends lump-sum deployment in hybrid strategies and a staggered approach for pure equity strategies, using market corrections for accelerated allocation.