Equity, Gold or Fixed Income: How should you invest amid stock market volatility? Here's a 50-40-10 strategy by MOSL

Stock Market Strategy: Geopolitical tensions, elevated crude oil prices, inflation concerns and global market volatility have left many investors wondering where to put fresh money. Should they stay invested in equities, move towards fixed income, or increase their allocation to gold?

According to Motilal Oswal Private Wealth's latest Alpha Strategist report, titled "Down, But Not Out", the answer is not to abandon risk assets but to remain disciplined and diversified. While Indian equities have lagged several global peers in the near term, the wealth management firm believes India's macroeconomic fundamentals remain resilient and continue to support a constructive long-term investment outlook.

The firm has retained a neutral stance on Indian equities while maintaining a relative overweight position on mid- and small-cap stocks. It has recommended a portfolio allocation of approximately 50% hybrid and large-cap strategies, 40% mid- and small-cap stocks (SMIDs), and 10% global exposure. It also prefers lump-sum deployment into hybrid strategies and a staggered approach for pure equity-oriented investments.

"Although India has faced pressure from geopolitical uncertainty, elevated crude prices, slower earnings momentum, and the absence of large direct AI-linked plays, the fundamentals remain resilient, supported by healthy GDP growth, stable inflation, strong forex reserves and improving corporate balance sheets," said Ashish Shanker, MD & CEO, Motilal Oswal Private Wealth.

One reason for the firm's confidence is the resilience shown by small- and mid-cap stocks. According to the report, SMIDs have significantly outperformed large-cap stocks since the onset of the Middle East conflict, highlighting their relative strength despite challenging market conditions.

Why Debt and Gold Still Deserve a Place in Portfolios

While the outlook on equities remains constructive, Motilal Oswal Private Wealth believes investors should not ignore the role of fixed income and precious metals in portfolio construction.

The firm expects interest rates to remain elevated for longer as the Reserve Bank of India signals a pause in the rate-cut cycle. At the same time, inflation risks have resurfaced due to higher oil prices, currency volatility and geopolitical uncertainty. Against this backdrop, it continues to recommend cash flow-focused accrual strategies across the credit spectrum. However, it cautioned that renewed pressure on crude oil prices or the rupee could push bond yields higher again.

"Despite the global uncertainties and FII apathy towards Indian markets, the resilience in India's macroeconomic fundamentals, stable growth outlook, and strengthening corporate balance sheets continue to support a constructive long-term investment outlook," said Sandipan Roy, Chief Investment Officer, Motilal Oswal Private Wealth.

On precious metals, the firm maintains a neutral allocation stance on both gold and silver, while assigning greater weight to gold. The preference for gold is supported by continued buying from central banks and easing speculative excesses in global gold markets.

Rather than reacting to short-term market swings, the firm believes investors should focus on disciplined asset allocation and gradual portfolio construction. Strategic asset allocation, it said, remains the key to navigating uncertain market conditions while staying aligned with long-term financial goals.

"We continue to maintain a neutral stance on Indian equities with a relative preference towards mid and small caps, while recommending a balanced portfolio allocation of 50% hybrid and large caps, 40% SMIDs and 10% global exposure," Roy said.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.