Opportunities in Uncertainty: Motilal Oswal Private Wealth Recommends Hybrid Investment Approach for H1CY25

Opportunities in Uncertainty: Motilal Oswal Private Wealth Recommends Hybrid Investment Approach for H1CY25

• Global and domestic events to create uncertainty in near term
• Expects India to continue be amongst the highest growing major economies despite the recent slowdown in growth
• Indian Economy Poised for Resurgence in H2CY25

Mumbai, 15th January 2025: According to Motilal Oswal Private Wealth (MOPW), Indian markets are expected to remain volatile in the first half of 2025 due to several global and domestic events, including the new Trump administration’s policies, China’s measures to counter trade tariffs and its possible implications for EM currencies, and the upcoming Indian Union budget. These events are anticipated to create uncertainty in the near term. However, as these events unfold and greater clarity emerges, market volatility is expected to subside in the latter half of the year.
Despite the recent slowdown in GDP, MOPW remains optimistic about India’s growth due to its macroeconomic stability, supported by significant foreign exchange reserves and a regulated twin deficit. It expects GDP growth to improve compared to the modest growth reported in Q2 FY25.

Ashish Shanker, MD & CEO of MOPW says, "The post covid period has been extremely rewarding to equity investors driven by earnings growth, improving macros and domestic inflows into equities. The year 2024 has been no different with broader markets doing extremely well. The mid cap and small cap segment have outperformed the large caps. Gold has also done well as an asset class. The year 2025 will bring its share of uncertainty as the new US president gets sworn in. After years of good performance the US markets also looks tired. This calls for moderation in expectations and a sharp focus on risk management through asset allocation"

After tepid corporate earnings and slow GDP growth in Q2FY25, MOPW recommends closely monitoring the upcoming earnings season and GDP growth trajectory.. We expect this trend to reverse and expect large caps to do better this year given the valuation comfort. In the longer term, earning growth and stock returns should converge. Considering this, it seems small cap stocks have run up way ahead of earnings growth in most of the segments. MOPW expects this trend to reverse and large caps to do better this year given the valuation comfort.

With investment charter and asset allocation remaining the anchor for the long-term, MOPW presents their view and recommended strategies across equity, fixed-income, gold, and real estate.

1.Equity Outlook:

Despite potential short-term volatility, the medium-term outlook for Indian equities remains positive. This optimism is driven by several factors, including:
Portfolio Strategy:

• India''s stable macroeconomic environment, characterised by controlled fiscal and current account deficits.
• For stability and steady compounding, a balanced approach is recommended. Large caps/hybrids to be a core allocation in portfolios. Complement it with staggered investing over the next 2-3 months in mid and small caps. Prefer index-led or hybrid strategies for large caps and active, focused strategies for mid and small caps.
• Use lump-sum allocations in hybrid funds at current levels; adopt a staggered SIP/STP approach for pure equity strategies over the next 2-3 months.

2. Fixed Income Outlook:

Most uncertainties appear to be behind us or largely priced in India’s fixed income market. With benign inflation, expected downward projections, and a likely softening by the US Fed, the RBI’s neutral stance is expected to remain data-dependent with room for further rate cuts during CY26.
While the Budget maintains medium-term growth credibility and fiscal discipline, near-term bond market dynamics remain supply-heavy, warranting caution on duration in near term. Beyond rate action, RBI is actively injecting liquidity into the system through OMO purchases, USD/INR swaps, and CRR cuts. RBI OMO intensity will need to increase materially for yields to stabilize.
Tactical opportunities in duration may arise over this quarter. Elevated term premium (~140 bps) offers scope for curve steepness coming down, led by softening long-term yields, making 10–15Y G-Secs attractive.
Hence the core allocation in the fixed income portfolio should be accrual-based strategies.
Portfolio Strategy:

• Allocate 45-55% of the fixed income portfolio to performing credit and private credit strategies, selective infrastructure investment trusts (InvITs), real estate investment trusts (REITs), and non-convertible debentures (NCDs) for a minimum period of 3-5 years. InvITs may see some capital appreciation due to softening rates.
• For shorter holding periods, allocate in relatively liquid fixed income alternative solutions like Arbitrage Funds (three months minimum holding period), Hybrid SIF Funds (minimum two years), and Conservative Equity Savings funds (minimum three years).
• Consider tactical allocation to long-duration G-Secs (10 /15 year) at yield levels of ~6.8-6.9%/7.1-7.2%), for investors comfortable with duration risk, offering scope for capital appreciation and steady coupon income.

3. Commodities (Gold / Silver) Outlook:

Precious metals delivered exceptional returns, with gold and silver outperforming most assets classes over the past year. Gold’s rally has been largely structural and policy-driven, and we continue to view gold as a strategic portfolio asset amid ongoing fiscal imbalances, currency debasement, and an uncertain monetary policy outlook. Silver’s sharp rally has been driven by structural supply constraints amid rising industrial demand from solar, EVs, and technology, though its higher volatility may warrant a more measured approach in 2026.
Portfolio Strategy:

• Gold: Maintain a neutral asset allocation for portfolio stability, accumulate gradually during market dips for moderate returns over a medium term.
• Silver: Retain exposure to silver in portfolios; consider partial profit-booking for large exposures, and staggered accumulation on corrections for those with no-to-low exposure.

4. Real Estate Outlook:

The Indian real estate market has seen strong growth and sustained capital inflows in recent years. Commercial real estate remains the key driver largely led by the expansion of GCCs. This market is expected to remain healthy in 2026 as well. But direct commercial real estate largely remains an institutional play due to large capital requirement and individual exposure should be taken through fund route.
In our view, we are in the mid phase of the real estate cycle. Over the previous 3-4 years post covid, prices have risen sharply. Now, we expect that volume should lead this phase of the cycle while price rise may be modest. Therefore, residential real estate is likely to deliver single-digit returns in 2026 amid low rental yield of 2-3%. Future returns will depend more on micro-market selection, developer quality, and execution, rather than broad-based price appreciation.
Portfolio Strategy:

• REITs offer a more efficient and diversified way to access real estate-linked cash flows – be it commercial, warehouse or data centre. These vehicles provide exposure to income-generating assets with professional management and are supported by SEBI’s framework. Amidst the volatile market outlook, a 5-10% allocation to REITs can help improve portfolio stability and enhance income visibility.

About Motilal Oswal Private Wealth:

Motilal Oswal Private Wealth (MOPW) is a part of Motilal Oswal Group – an institution trusted for knowledge-based investing with a proven performance track record of over 38 years. MOPW was instituted in the year 2007 to cater Corporates/Institutions, High Net Worth and Ultra High Net worth Individuals. With our research based DNA, an open architecture framework and a deep understanding of your unique needs, we take pride in transforming your ambitions into a lasting legacy by unlocking a world of infinite possibilities.

As of September 2025, we manage the wealth needs of over 7,000+ relevant families across 20+ cities with assets under advisory of over Rs. 1,86,886 Crores.

For further details contact:
Rohini Kute
Head, Corporate Communication,
Motilal Oswal Financial Services
Mobile: 9820196838
Mail: rohini.kute@motilaloswal.com

Investments are subject to market risks, read all scheme related documents carefully.