Should Large Caps and Hybrid Equities Be the Core of Your Portfolio in 2026?
Synopsis
A recent report emphasizes the importance of incorporating large caps and hybrid equities as the mainstay of investment portfolios in 2026, alongside a considered approach to mid and small caps. Discover what investment strategies can maximize returns amid improving market conditions.
Key Takeaways
Core Allocation: 50% to large caps & hybrids.
Mid & Small Caps: 40% allocation recommended.
Global Markets: 10% of the portfolio.
Fixed Income: Focus on performing credit and private credit.
Residential Real Estate: Expect single-digit returns in 2026.
Mumbai, Feb 5 (NationPress) Investors are urged to adopt a well-rounded investment strategy for 2026, placing large caps or hybrid equities at the heart of their allocations. This should be supplemented with a gradual and selective inclusion of mid and small caps, according to a report released on Thursday.
The analysis by Motilal Oswal Private Wealth advocates for this strategy due to the strengthening fundamentals and macro conditions in India’s equity markets.
Following a consolidation phase in 2025, India's valuation position has improved, backed by better valuations, initial signs of earnings recovery, favorable domestic policies, and the completion of a trade agreement, the report indicated.
The brokerage suggests an indicative allocation of 50% towards large caps and hybrids, 40% in mid and small caps, and 10% in global markets.
As large caps enter the new year with solid support from reasonable valuations and improved earnings visibility, mid and small caps also present attractive entry opportunities, according to the report.
Regarding the upcoming Budget, the firm pointed out that incentives for manufacturing, enhancements in services, improvements in logistics, and asset monetization are expected to bolster conditions for long-term profit growth within the equity market.
For fixed income investments, the firm recommends a bias towards short-to-medium duration, favoring accrual-based strategies while considering long-duration G-Secs at yields between 6.8–6.9% and 7.1–7.2% for G-Secs with a duration of 10–15 years.
Investors are advised to allocate 45–55% of their fixed income portfolio to performing credit, private credit, selective infrastructure investment trusts (InvITs), real estate investment trusts (REITs), and non-convertible debentures (NCDs) for a minimum of 3-5 years.
The report predicts that residential real estate may yield single-digit returns in 2026, given the low rental yields of 2-3%. Future returns will heavily rely on micro-market selection, developer quality, and execution capabilities, rather than general price increases.
The brokerage suggests that investors should remain neutral in their strategic asset allocation and exercise patience through short-term fluctuations, all while focusing on long-term investment goals.
Point of View
I believe that investors must adopt a strategic and patient approach to their portfolios in 2026. The latest report highlights the shift in market dynamics towards large caps and hybrid equities, ensuring that investment decisions are rooted in sound fundamentals and long-term objectives.
NationPress
1 Jul 2026
Frequently Asked Questions
What should be the core allocation in my portfolio for 2026?
According to the report, large caps and hybrid equities should form the core allocation, supplemented by mid and small caps.
What is the recommended allocation for fixed income investments?
Investors are advised to allocate 45-55% of their fixed income portfolio to performing credit, private credit, InvITs, REITs, and NCDs.
How will the Budget impact the equity market?
The Budget is expected to provide incentives for manufacturing and services, which should enhance conditions for sustained profit growth in equities.
What yield levels should I consider for long-duration G-Secs?
The report suggests considering long-duration G-Secs at yield levels of about 6.8–6.9% and 7.1–7.2%.
What are the expectations for residential real estate in 2026?
Residential real estate is likely to yield single-digit returns due to low rental yields; future returns will depend on micro-market selection and developer quality.
