What should be your portfolio strategy for May 2026?

Indian stock markets have managed to post decent gains in April, supported by upbeat quarterly earnings by India Inc but the month of May will be largely dictated by global cues including the US-Iran peace talks, inflation concerns, crude oil prices and FIIs selling of the local equities.

Broader economic indicators remain broadly intact for India, but external trade headwinds persist. Besides this, with all positives priced in, upside potential remain limited in the equity market believe experts. But this raises the questions that what should investors do to navigate volatility in the volatility. 

Answering this in a nutshell, market experts said that one should stay invested but stay cautious, rebalance smartly and keep some cash ready. “May could be volatile but not necessarily bearish,” they believe, with some select opportunities popping up in select pockets. 

Investors should not rush to change portfolio strategy for May, but the balance of risk is turning more constructive for equities, said Ankit Patel, Co-founder & Partner at Arunasset Investment Services. The Fed’s decision to hold rates steady confirms that inflation and energy-price uncertainty remain concerns, especially with the Iran-US conflict unresolved, he said.

“India has a much stronger macro set-up but the war-led pressure has shifted sharply. If a large share of its oil exports is blocked, its main revenue source is hit. That could weaken its ability to sustain conflict and force negotiations. We would stay overweight Indian equities and use volatility to add selectively,” he adds.

Experts said that investors should keep an eye on rising oil prices, inflation concerns, weak rupee, and foreign outflows are key risks. India’s fundamentals stay strong, but caution is needed. Trim small/mid-cap exposure, book partial profits, and keep cash ready. Add gold and dollar-linked assets as hedges while using dips to selectively invest.

Four major macro forces are converging simultaneously, and each one has a direct implication for investors should position themselves, said Harsha Vardhana VM, Founder & Group CEO at Atom Privé Wealth, citing US Fed’s policy outcome, inflation concerns amid rising crude oil prices, depreciation of the Indian rupee against the US Dollar and FIIs exodus as the major triggers for the market.

May 2026 is not a month for portfolio complacency. India’s structural story remains intact and arguably more compelling than ever, said Harsha Vardhana from Atom and suggested investors to rebalance, instead of exiting. “Increase allocation to dollar-linked assets and add gold as a geopolitical hedge, because the rupee story is far from over. Trim overweight small-cap positions,” he said.

“We saw a clear divergence in month of April with currency, bond and commodity markets signaling possibility of crude price staying at elevated levels for longer duration while equity and crypto markets indicating at crude spike is a short-term phenomenon,” said Karan Aggarwal, Co-founder & CIO, Ametra PMS, a quant based PMS & Portfolio Manager. 

As of now, it is looking like oil prices might remain elevated throughout May and the equity market, especially in an oil-importing trade deficit economy like India, might be found on the wrong footing. Investors are advised to book nearly 20-30 per cent profits in smallcap/midcap space to have something in dry powder in case equity markets are found overconfident, he adds.