The stock market’s 8-week losing streak has finally come to an end. On October 5, the very first day of the trading week, Dalal Street came alive and both the major indices closed in the green. The Sensex rose 473 points to 72,382, while the Nifty gained 134 points to close at 22,556. Midcap and smallcap stocks were at the forefront of the rally, where investors bought heavily. Along with this, shares of capital market, FMCG, PSE and energy sector also supported the market. However, pharma stocks remained sluggish and the IT index lost its gains to close flat. The Bank Nifty improved 263 points to close at 54,714 and the midcap index rose 392 points to close at 59,124. Market breadth was also strong, with 31 out of 50 Nifty stocks and 20 out of 30 Sensex stocks posting gains. The rupee also strengthened by two paise against the dollar to close at 96.29.

After 8 consecutive weeks of decline, the renewed greenness in the market has left investors confused. The question is, is this the right time to invest money in the market at once or should we wait a bit? This dilemma can be resolved with the help of a report by Alpha Strategist of renowned brokerage house Motilal Oswal Private Wealth. In fact, brokerages say the current market is neither so cheap that aggressive buying can be done without a second thought, nor so expensive that investors panic and become overly cautious. For this reason, the company has kept its outlook on equities neutral, but remains bullish on the midcap and smallcap space.

Is it better to invest all at once or move slowly?

According to a Motilal Oswal report, if an investor is thinking of investing money entirely in equities, he should avoid investing lump sums. Instead, it would be wise to adopt a phased i.e. installment strategy. When investors are opting for a hybrid strategy, there may be concurrent capital investments. If there is a sharp correction or decline in the market in the coming days, investors can increase their investment pace.

The firm has not made any changes to its proposed asset allocation model. Under this model, investors should hold 40 percent of their total portfolio in hybrid or largecaps. Apart from this, 10 per cent should be given to global equities, while a maximum allocation of 50 per cent has been fixed for midcap and small cap stocks. The brokerage believes that this allocation strikes an appropriate balance between risk and long-term returns.

A reason for strong confidence in midcap-smallcap stocks

Brokerages are still bullish on midcap and smallcap. Solid earnings of companies have emerged as the biggest strength behind this confidence. The profits of Nifty 50 companies in the first quarter of the financial year 2026-27 increased by around 18 per cent year-on-year. Along with this, the results of medium and small companies have also given positive signals to the market.

In the Motilal Oswal Financial Services (MOFSL) universe, the ratio of companies with lower estimates to earnings estimates has increased to 1.5 times. This figure is the highest in the last 22 quarters. However, the brokerage also cautioned that midcap and smallcap stocks are still trading at a premium to their 10-year average valuations. Relievingly, this premium has definitely come down a bit as compared to September 2024.

If we talk about the large cap i.e. Nifty 50, it is trading at 18.3 times the estimated earnings for the next 12 months. This is about 12 percent cheaper than its historical average ie 20.9 times. Despite this, brokerages are not advising more aggressive buying, as the supply of new shares in the market continues to increase, along with strong domestic flows.

Three major economic risks are rising globally

India’s internal economic foundation appears to be very strong amidst all the global challenges. The country’s real GDP growth in the first quarter of FY 2026-27 has been 7.8 percent year-on-year. During this period, private consumption rose by 7.1 percent and gross fixed capital formation by 11.9 percent. Manufacturing, domestic consumption, investment and service sectors have given a new impetus to the growth rate of the country. Also, money coming in from local investors keeps the market going.

But despite domestic strength, threats continue to rise on the international front. The first major threat is crude oil. Brent crude crossed $100 per barrel in September and reached $108 to $109 by mid-month. Even on October 6, crude oil remained above $100. Another threat is to bond yields. Long-term government bond yields in developed countries have been at record levels for several years. The third major blow has been delivered by the American central bank. On September 16, the US Federal Reserve raised its interest rates by 0.25 percent to 3.75 to 4 percent. This was the first rate hike by the US Fed since 2023. Rising bond yields and expensive interest rates can put pressure on stock market valuations.

In the fixed income i.e. debt market, Motilal Oswal believes that holding high yields for long may now become the new normal. India’s 10-year government bond yield has risen to close to 7 percent. In such times brokerages prioritize accrual strategy rather than duration. Under this, the focus is on regular income generating options like private credit, high yield NCDs and InvITs. Arbitrage and Specialized Investment Funds (SIFs) are considered better for liquidity.