Why Kotak AMC’s Nilesh Shah Sees Balanced Allocation Between Equities and Precious Metals
About Kotak AMC and Nilesh Shah’s Market Perspective
Kotak Asset Management Company, led by veteran market participant Nilesh Shah, is widely tracked for its long-term, cycle-aware investment philosophy. Rather than chasing near-term momentum, Kotak AMC’s views typically focus on asset allocation, valuation discipline, and macro-driven sectoral shifts.
In his latest commentary, Nilesh Shah has provided aKotak AMC’s Nilesh Shah outlines portfolio allocation strategy, positive outlook on gold and silver, midcap outperformance expectations, and views on equities for CY26–27. Comprehensive framework covering equities, precious metals, market-cap segmentation, and sector-specific expectations. The message is clear: the coming years are about balance, not extremes.
His observations are particularly relevant at a time when investors are grappling with stretched equity valuations, strong performance in precious metals, and growing divergence between largecaps and SMIDs.
Portfolio Strategy: Balance Between Equities and Precious Metals
Nilesh Shah recommends dividing portfolios between equities and precious metals, highlighting the importance of diversification across asset classes.
This approach reflects a recognition that markets are entering a phase where returns may become more uneven. Equities continue to offer growth, but precious metals provide stability, hedge against global uncertainty, and protection against currency volatility.
Rather than viewing gold and silver as tactical trades, the emphasis is on treating them as strategic portfolio components that help smooth volatility during equity drawdowns.
Gold and Silver: Positive Outlook Without Parabolic Expectations
While the outlook on gold and silver remains positive, Kotak AMC does not expect a parabolic rally in precious metals to spill into 2026.
This distinction is critical. The recent strength in precious metals has been supported by macro fundamentals, but exponential, momentum-driven rallies are not seen as sustainable over long periods.
Instead, returns are likely to be steady and range-bound rather than euphoric. This reinforces the idea that gold and silver are best suited for portfolio balance rather than speculative excess.
Investors expecting straight-line upside may be disappointed, but those using metals as risk stabilizers are aligned with the intended role of the asset class.
Central Bank Buying as the Key Driver for Precious Metals
According to Nilesh Shah, gold and silver performance will continue to be driven primarily by central bank buying rather than retail speculation.
Over the past few years, central banks across emerging and developed economies have steadily increased gold reserves. This trend reflects a desire to diversify away from excessive dependence on any single currency.
Such buying is typically long-term and price-insensitive, providing structural support to precious metal prices. This reduces the probability of sharp collapses even if short-term sentiment cools.
Silver, while more industrial in nature, also benefits indirectly from the same macro and monetary dynamics, though with higher volatility.
Equities Outlook: SMIDs and Largecaps Gap Likely to Narrow
Kotak AMC expects the valuation and performance gap between SMIDs and largecaps to narrow over time.
In recent cycles, select midcap and smallcap stocks have significantly outperformed largecaps, leading to stretched relative valuations. Such divergences rarely persist indefinitely.
As earnings growth normalizes and liquidity becomes more discerning, largecaps may regain relative stability while SMIDs face greater scrutiny.
This does not imply a bearish stance on midcaps, but rather a call for selectivity and realistic return expectations.
Why Midcaps Are Expected to Outperform in CY26 and FY27
Despite near-term valuation concerns, Kotak AMC expects midcaps to outperform in CY26 and FY27 on an earnings growth basis.
Midcap companies often sit at the sweet spot of scalability and operational leverage. As economic growth sustains, these businesses can grow faster than mature largecaps.
However, performance is expected to be stock-specific rather than index-driven. Investors must differentiate between structurally strong midcaps and those driven purely by liquidity flows.
This reinforces the need for bottom-up research rather than broad-based exposure.
IT Sector: Not a Material Driver in the Current Framework
Nilesh Shah noted that current macro factors discussed are not a material driver for IT sector performance.
This suggests that IT stocks will continue to be driven more by global demand cycles, currency movements, and client spending patterns rather than domestic asset allocation shifts.
For investors, this implies that IT exposure should be aligned with global tech and outsourcing trends rather than thematic domestic plays.
Investor Takeaway
Kotak AMC’s Nilesh Shah advocates a disciplined, allocation-driven approach rather than chasing extremes. Equities remain essential for growth, precious metals provide balance, and midcaps offer selective opportunity over CY26 and FY27.
The key message is moderation and structure—avoiding parabolic expectations while positioning portfolios for sustainable, risk-adjusted returns.
Access more structured market insights and long-term allocation perspectives at Indian-Share-Tips.com, which is a SEBI Registered Advisory Services.
SEBI Disclaimer: The information provided in this post is for informational purposes only and should not be construed as investment advice. Readers must perform their own due diligence and consult a registered investment advisor before making any investment decisions. The views expressed are general in nature and may not suit individual investment objectives or financial situations.
