‘Next Upswing From Broader Markets’: Motilal's Gautam Duggad Bullish On Mid, Small Caps—Here's Why

The Indian stock market could be set for brighter days ahead, but only if earnings growth lives up to expectations, according of Motilal Oswal Institutional Equities's Head of Research, Gautam Duggad, who is bullish on India's mid and small cap sector.

“We are expecting 10–20% earnings growth in FY26. If those expectations meet, we might be set for positive trends in the market,” Duggad told NDTV Profit, noting that earnings stability could be a big factor going forward.

Duggad went on to double down on his conviction on broader market stocks, believing that the next leg of upswing could come from the higher growth areas of the market. As such, Motilal Oswal as a fund house has significantly increased weightage in broader market.

“We’ve increased the weightage of mid and small caps by ten percentage points. What used to be 25% of the portfolio is now 35% of the portfolio,” he said.

While small caps have recently come under pressure in terms of earnings growth, Duggad argued the weakness has been uneven and concentrated in one pocket.

“Small caps have seen a bit of a decline, but it has been largely driven by financials,” he said. “Without financials, even small caps have posted strong growth, while midcaps have continued to outperform the largecaps.”

Speaking of financials, Duggad said there are opportunities in the sector, particularly in the non-lending and capital market segments.

“We are also positive on financials,” he said. “But our play towards the financials has been more towards the non-lending entities and capital market players — AMCs, stockbrokers, depositories. That’s a very juicy segment in my view.”

He added that the broader structural story remains intact. “In the next three to five years, the growth runway for non-lending and capital markets stocks is very high,” he said.