Staggered or lump sum? Here's how to invest in equities this quarter

For tax efficient fixed income alternative solutions, 20% - 25% of the portfolio may be allocated in Conservative Equity Savings funds (minimum 3 years holding period)

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In its April 2025 Alpha Strategist report, Motilal Oswal Private Wealth (MOPW) has revealed a strong performance by active funds across all major categories during FY25, outpacing their passive counterparts—a reversal of the recent trend that had favored passive investing. The firm expects this outperformance by active strategies to continue through the coming quarters.

 

Neutral stance on equities, strategic deployment recommended

MOPW is advising a neutral stance on equities as an asset class, citing current market valuations and volatility. However, the firm recommends a nuanced approach for investors looking to deploy capital. A lump-sum investment strategy is favored for Hybrid Funds, while a staggered investment approach over the next 2–3 months is suggested for Large Cap, Flexi Cap, Mid- and Small-Cap Funds.

 

In the event of a deeper market correction, MOPW suggests accelerating capital deployment to capitalize on improved valuations.

 

Equity Market Valuations: A Mixed Picture

The Indian equity market presents a mixed valuation landscape. The 12-month forward P/E of the Nifty-50 is currently 15% below its September 2024 high, and the index trades at a 3% discount to its long-period average (LPA)—indicating more reasonable valuations in large caps.

 

However, mid-cap and small-cap indices continue to trade at elevated levels—26% and 32% above their LPAs, respectively—raising caution around these segments due to relatively higher valuations.  "Considering the recent corrections, if Equity allocation is lower than desired levels, investors may increase allocation by implementing a lump sum investment strategy for Hybrid and a staggered approach for Large Cap, Flexi Cap, Mid & Small cap over the next 2-3 months, with accelerated deployment in the event of a meaningful correction," said Motilal Oswal in a note.

 

Fixed Income: Accrual Strategies Take Center Stage

On the fixed income front, the RBI’s recent rate cuts and liquidity infusions have slightly steepened the yield curve, prompting MOPW to suggest exiting long-duration instruments as the duration trade nears its end.

 

Instead, MOPW recommends an overweight allocation to accrual-based strategies within fixed income portfolios. The firm proposes a diversified approach across:

 

30%–35% in Performing Credit Strategies, NCDs, and InvITs

 

20%–25% in Private Credit, including Real Estate and Infrastructure

 

25%–35% in Arbitrage, Floating Rate, and Absolute Return Long/Short Strategies

 

20%–25% in Conservative Equity Savings Funds for tax-efficient returns

 

Gold: A Neutral but Stable Portfolio Pillar

Gold continues to reaffirm its role as a traditional safe haven amid ongoing global uncertainties. MOPW maintains a neutral allocation stance on gold, emphasizing its historical resilience during turbulent market phases.

 

Recent data shows robust demand for Gold ETFs, with $6 billion (67 tonnes) of net inflows in March from U.S. investors alone, followed by strong interest in Europe and Asia. The trend signals sustained appetite for gold-backed investments.