Motilal Oswal Private Wealth has recommended flexi-cap equity and credit as core portfolio allocations for 2026, citing improving valuations, early signs of an earnings recovery and supportive domestic policy tailwinds following a consolidation-led 2025. 

In its latest outlook, the firm said India’s relative valuation position has strengthened after last year’s market consolidation, aided by easing macro headwinds, the conclusion of key trade agreements and improving earnings visibility. While near-term volatility may persist, Motilal Oswal Private Wealth said the Union Budget has reinforced the long-term drivers of equity returns through continued focus on manufacturing incentives, a boost to services, logistics improvements, and asset monetisation. 

A balanced investment strategy

For 2026, the firm recommends a balanced investment strategy, with large-cap equities and hybrid instruments forming the core of portfolios. This, it said, should be complemented by staggered and selective exposure to mid- and small-cap stocks, supported by improving fundamentals and a more stable macroeconomic environment. 

The investment philosophy is reflected in Motilal Oswal Private Wealth’s Alpha Strategist – January 2026 report titled “The Daedalus Way”. The report highlights resisting extremes in market behaviour and maintaining balance, cautioning investors against both narrative-driven optimism, and macro-led pessimism. It underlines the importance of disciplined, valuation-led portfolio construction, and long-term execution over short-term market noise. 

Inflection point for Indian markets

Ashish Shanker, MD and CEO of Motilal Oswal Private Wealth, said the transition from global uncertainty and consolidation in 2025 to a more execution-driven phase in 2026 marks an inflection point for Indian markets. “While global factors such as moderating AI momentum, geopolitical tensions, and trade realignments remain relevant, India enters 2026 on stronger footing with improving valuations, better earnings visibility, and supportive policy tailwinds,” he said, while adding that stability through large-cap and hybrid allocations, along with selective accumulation in mid- and small-cap stocks—particularly in the first quarter—would be key. 

Sandipan Roy, Director and Chief Investment Officer, said Indian equities saw divergent performance in 2025, with modest large-cap returns, volatility in mid-caps and corrections in small-caps. Globally, markets have moved into a phase of normalisation amid rising geopolitical risks and moderating AI-led capital expenditure. 

As India heads into 2026, Roy said easing headwinds, stabilising currency pressures and domestic policy support—such as interest rate cuts, tax relief, GST rationalisation, and sustained RBI liquidity—are expected to translate into stronger growth and earnings. Investor confidence has also improved following the India-US trade deal and the signing of a free trade agreement with the European Union, he added.