New Delhi, Sep 28 (IANS): Strong domestic fundamentals amid elevated global macroeconomic risks are creating a divergent investment landscape for investors, a report said on Monday which has retained a neutral stance on equities while continuing to favour midcap and smallcap stocks.
According to analysis by Motilal Oswal Private Wealth (MOPW), India’s domestic economic backdrop is still significantly stronger despite geopolitical tensions, high crude oil prices, sticky inflation, and rising global bond yields.
India’s real GDP growth accelerated to 7.8 per cent year-on-year in the first quarter of FY27, supported by manufacturing, consumption, investment and services, it showed.
Meanwhile, private consumption grew 7.1 per cent and gross fixed capital formation rose almost 11.9 per cent during the quarter.
In addition, corporate earnings have also remained robust.
Nifty 50 companies posted nearly 18 per cent year-on-year profit growth in first quarter of FY27, while earnings of midcap and smallcap firms continued to outperform expectations.
However, the report cautioned that stronger profits may not necessarily translate into a broad-based market re-rating.
Domestic liquidity remains supportive but a growing pipeline of initial public offerings (IPOs), block deals, promoter stake sales and other equity issuances is absorbing a significant portion of investor flows, it added.
In terms of public issues, IPOs alone raised about Rs 46,000 crore between April and August FY27 with a sizeable issuance pipeline still ahead, making stock and sector selection increasingly important.
The report has therefore maintained its recommended asset allocation of 40 per cent to hybrid and largecap strategies, 10 per cent to global equities and 50 per cent to midcap and smallcap shares.
Sandipan Roy, Chief Investment Officer, Motilal Oswal Private Wealth said the opportunity for investors lies in identifying quality businesses rather than simply increasing market exposure.
“We continue to see merit in midcap and smallcaps, while maintaining discipline on valuations and preferring accrual strategies in fixed income as global yields remain elevated,” Roy said.
On fixed income, the firm said higher-for-longer yields are becoming the new normal and reiterated its preference for accrual-based strategies over duration bets.
In addition, it also favours private credit, high-yield non-convertible debentures, InvITs and arbitrage-oriented strategies.
For precious metals, the report retained a neutral stance but expressed a preference for gold over silver, citing continued central-bank purchases and strong inflows into gold-backed exchange-traded funds as key support factors.
