The most common and most likely answer to this crossword clue is the 2 plus 3 plus 9 letter word NO OIL PAINTINGS
I've seen this crossword clue in Financial Times
N
O
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I
L
P
A
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N
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Buddy explains!
The straight part
We know that "Portraits in water-colours/Could be the Ugly Sisters, no doubt!" is the straight/definition part of the clue. The straight part is often a synonym or definition, in this case portraits in water-colours/could be the ugly sisters, no doubt! = no oil paintings.The cryptic/wordplay part
In cryptic crossword there's often an wordplay/cryptic part as well.This part involves a more complex hint, such as an anagram, homophone, hidden word, etc.
Sadly, We don't have an explanation for this specific crossword clue yet.