How to invest across equity mutual funds: Motilal Oswal suggests 50:40:10 mix amid global uncertainty

Mutual fund investors deciding where to invest need to look beyond choosing an individual scheme and first assess how much of their portfolio should go into different equity categories.

Motilal Oswal Private Wealth’s September 2026 Alpha Strategist report, “A Tale of Two Currents”, has suggested an equity allocation framework across mid- and small-cap funds, hybrid and large-cap funds, and global funds.

The approach reflects its positive assessment of India’s domestic economy, while factoring in global risks, higher crude prices, and rising yields.

How much to allocate across equity mutual fund categories?

The wealth manager has maintained a neutral view on equities in the short term and a positive view over the long term. Its suggested allocation is:

• 50% — Mid- and small-cap funds
• 40% — Hybrid and large-cap funds
• 10% — Global equities or international funds

So, for every ₹100 allocated to this equity portfolio framework, ₹50 would go to mid- and small-cap funds, ₹40 to hybrid and large-cap funds, and ₹10 to global equity funds.

The report mentioned that the domestic economy remains resilient, with Q1FY27 GDP growth at 7.8% and Nifty 50 profits growing around 18% year-on-year.

For equity MF investors, this provides the domestic growth and earnings backdrop behind the allocation towards equity categories.

At the same time, higher crude prices, global yields and geopolitical risks have created uncertainty. Motilal Oswal Private Wealth described this as a “Tale of Two Currents”, with “strong domestic growth, earnings and liquidity” supporting Indian equities while “high crude, rising global yields, fiscal concerns and increasing supply” work in the opposite direction.

Valuations are another consideration for investors. The report states that the Nifty 50 is trading at 18.3x 12-month forward P/E, around 12% below its historical average of 20.9x.

Mid and small caps remain at a 9% and 30% premium, respectively, to their 10-year averages, although these premiums have moderated meaningfully from September 2024.

How should you invest in equity and hybrid funds?

The report also differentiates between hybrid funds and pure equity funds when it comes to deployment.

Motilal Oswal Private Wealth suggested “lump-sum investments in hybrid funds at current levels”.

For pure equity-oriented funds, it said “a staggered approach is prudent given the uncertainty” over the next 2 to 3 months. It further suggested that “any sharp correction should be used for aggressive deployment”.

Which mutual fund schemes does the report identify?

For investors with more than 3-years of holding period, the report identified the following categories and schemes:

• Equity hybrids: ABSL Balanced Advantage Fund and Edelweiss Aggressive Hybrid Fund
• Mid and small-cap funds: Edelweiss Mid Cap Fund, Invesco India Mid Cap Fund, Bandhan Small Cap Fund and Sundaram Small Cap Fund
• International funds: Mirae Asset Global Allocation Fund, DSP Global Equity Fund and WhiteOak Global Emerging Markets ex-India.

Investors should assess a fund’s risk, portfolio, performance, costs, and suitability for their own investment horizon before investing.

Disclaimer: This is purely for educational/informational purposes and should not be taken as any sort of investment advice. Always consult a SEBI-registered advisor before making any investment decisions.