The Motilal Oswal October 2026 Dear Investor note: FPIs may take a while to return, and with growth stronger outside the large cap indices, consistency with the Nifty may no longer travel with better relative performance.
Motilal Oswal October 2026: consistency versus alpha
This month’s Motilal Oswal October 2026 Dear Investor note comes from Prateek Agrawal at Motilal Oswal Mutual Fund. Read alongside the DSP Netra October edition and the Motilal Oswal September outlook.
WHY FPIs ARE SELLING
WHAT HAS IMPROVED
THE DISTINCTION
OVERALL OUTLOOK
Summary
The Motilal Oswal October 2026 note covers FPI selling, the broader market’s higher earnings growth compared with large cap indices, and the possible implications for market performance.
FPIs are selling emerging markets and it might be a while before they become buyers. Growth outside the major indices has been stronger than growth within them — so, Motilal Oswal says, it is time to distinguish between consistency and alpha.
The detail
FPIs are selling emerging markets; it might be a while before they become buyers
Rates rose globally, including in Japan and the US, increasing the cost of capital and reducing outward flows. A weak rupee could affect FPI returns; Motilal Oswal believes currency stability is needed before FPIs reconsider India. Higher oil prices are another risk.
Motilal Oswal believes FPIs came for growth and remain heavily invested in earlier leaders such as IT services and private banks, where growth has moderated. Newer growth leaders are smaller and may not absorb those outflows. Global AI opportunities and large upcoming US IPOs also compete for capital.
There are some positives
India’s valuations have improved relative to other emerging markets. Large US-dollar deposits raised by banks have helped lift forex reserves to a record and supported confidence. The AI trade may be becoming more expensive and uncertain.
As adverse factors reverse, India could regain favour. The overall impact of duties may be limited outside specific sectors, although volatility could persist.
It is time to distinguish between consistency and alpha
What the AMC says it was missing was this distinction during the 2008 to 2020 period: the Nifty led earnings growth, so constructs that stayed close to the Nifty provided both consistency and strong relative performance. Now that the broader market is growing faster, the two may not necessarily occur together.
China plus one after COVID let governments protect domestic manufacturing, there was a thrust to Make in India, and new spaces emerged — digital, EVs, renewables, capital market participants — most of whose companies did not exist 10 years ago. Constructs that move away from the index could have a greater chance of stronger outcomes over a period of time, though their consistency relative to the index may differ.
What this means for investors
The note’s own outlook
The note’s own outlook — the AMC’s views, not recommendations:
The Motilal Oswal October 2026 Dear Investor note sits alongside the DSP Netra October edition and the Motilal Oswal September outlook. For the underlying regulatory framework, see the Association of Mutual Funds in India.
Mutual fund investments are subject to market risks. Please read all scheme-related documents carefully. The views expressed are those of the AMC and do not constitute investment advice.
