Motilal Oswal Private Wealth has announced a significant revision to its recommended model portfolio, increasing exposure to mid- and small-cap investment strategies while reducing allocations to large-cap and hybrid strategies. The portfolio rebalance marks the firm's first strategic allocation change of 2026 after maintaining the same asset mix in its February and May quarterly strategy updates.

Under the revised allocation, the recommended exposure to large-cap and hybrid strategies has been reduced to 40 percent from 50 percent. At the same time, allocations to mid- and small-cap strategies have been increased to 50 percent from 40 percent, while the 10 percent allocation to global equities remains unchanged.

According to the firm's latest strategy report, improving market conditions, more attractive valuations following this year's correction, and expectations of a broader earnings recovery have created better investment opportunities beyond India's benchmark indices.

The report highlighted that several long-term structural growth themes are more prominently represented outside large-cap indices. These include defence, capital goods, healthcare services, diagnostics, exchange businesses, wealth management, and specialised manufacturing, making the broader market increasingly attractive for long-term investors.

Motilal Oswal Private Wealth also noted that stock selection has become more critical than broad sector allocation, as leadership within sectors continues to evolve. In healthcare, hospitals and diagnostic businesses are expected to outperform traditional pharmaceutical companies, while in financial services, wealth management firms, stock exchanges, and asset managers are emerging as attractive growth opportunities alongside conventional banking institutions.

The wealth manager believes improving market breadth and wider earnings dispersion are creating a more supportive environment for active portfolio management, allowing investors to benefit from differentiated business models instead of relying solely on benchmark-driven investments.

Despite increasing allocations to the broader market, the firm has maintained a neutral stance on Indian equities. It continues to recommend a balanced investment approach, advising investors to stagger fresh investments rather than deploy large lump-sum amounts at current market levels.

Looking ahead, Motilal Oswal Private Wealth remains constructive on India's medium-term outlook, supported by easing inflation, expectations of lower interest rates, improving domestic demand, and a gradual recovery in private sector capital expenditure. However, it cautioned that geopolitical developments and global trade-related uncertainties could continue to contribute to near-term market volatility.

The firm believes the next phase of corporate earnings growth is likely to be driven by a wider group of companies beyond those currently dominating benchmark indices, supporting its increased allocation towards mid- and small-cap investment strategies.