Mumbai: Motilal Oswal Private Wealth is overweight on Indian mid- and small-caps, although it maintains a neutral stance on Indian stocks. The money manager for deep pockets is increasing allocations by 10 percentage points to 50%, while suggesting a 40% allocation to hybrids and large caps. The rest – 10% – should include global equities.

“We have increased our overweight to mid- and small-caps given their stronger representation in high-growth, new-economy sectors and the improvement in valuations,” said Sandipan Roy, chief investment officer, Motilal Oswal Private Wealth.

For hybrid strategies, he recommends lump sum deployment at current levels, while pure equity-oriented strategies should be staggered given prevailing uncertainties. Roy said meaningful corrections could be entry points for aggressive exposures.

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While large-cap capital goods exposure is concentrated in a limited set of established engineering companies, the midcap and smallcap universe represents a wider cross-section of India’s capex cycle.

Even in the case of healthcare the exposure in mid and small cap indices extends well beyond pharmaceuticals-capturing hospitals, diagnostics, biotechnology, CDMO, medical devices and healthcare technology, which are high growth areas.
The wealth manager points out that FII flows are rotating away from benchmark-heavy sectors such as Financials, IT, FMCG and autos towards industrial and manufacturing themes like capital goods and metals, which have higher mid and small cap representation, thus reflecting improving FII preference for manufacturing led small and midcap opportunities.