Geojit wants investors to allocate 10% to smallcaps, 15% to midcaps in 2026

Geojit Financial Services on Wednesday said it has marginally upgraded its base Nifty target for December 2026 to 29,150, implying a 12 per cent year-on-year return. The brokerage attributed the upgrade largely to a pick-up in private capital expenditure, a recovery in the earnings cycle and moderation in global risk factors. The domestic brokerage advised investors to allocate 65 per cent of their portfolio to largecaps in 2026, 15 per cent to midcaps and 10 per cent to smallcaps. It also suggested reducing exposure to gold and silver to 5 per cent and to debt to 10 per cent.

Midcap and smallcap opportunities remain but on a selective basis, it said. 

Geojit said there was growing preference towards large caps by DIIs due to trade tensions, high margin of safety and stability in financials leading to outperformance. In 2025, Nifty delivered a return of 10 per cent, while Nifty Midcap 100 reported 4.6 per cent. Nifty SmallCap 250 fell 8.3 per cent.

"Midcaps performed on a selective basis driven by a pickup in earnings growth in Q2FY26 and the expectation of further revival in demand during H2FY26. Small caps stocks witnessed selling pressure due to higher valuation, lack of earnings recovery and retail selling," the noted. 

Geojit said the near-term domestic growth is likely to be aided by factors such as GST rate rationalisation, reductions in interest rates, a good monsoon, multiyear low inflation, and weak oil prices.

"However, current valuation appears expensive at 20.3 times, which is marginally above the 3-year average. Nifty50 is currently floating with near-term volatility, while further pickup is expected to follow Q3 results," it said.

Overall, the brokearge said equity outlook is supported by moderated inflation enabling potential rate cuts, structural domestic reforms boosting demand, supportive RBI policy and India’s valuations falling below long-term EM averages, reducing FII sell-off risk. 

"Our positive outlook is driven by expectations of easing geopolitical risks and moderating tariff differences in 2026. The US is unlikely to sustain aggressive trade policies amid rising inflation, declining corporate profitability, job losses and especially moving to the 2026 midterm elections. The US is under discussion with multiple other
countries for comprehensive trade deals to cut tariffs," it cited.