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Motilal Oswal's 5 large cap picks for August, with up to 23% upside

Motilal Oswal's Top 5 Large-Cap Stock Picks for August: Targeting Up to 23% Upside

In the ever-evolving landscape of the Indian stock market, brokerage firm Motilal Oswal has released its recommendations for August, focusing on five large-cap stocks that it believes offer significant upside potential amid current market dynamics. The selections come at a time when the Nifty 50 index has shown resilience, trading near all-time highs despite global uncertainties such as geopolitical tensions and fluctuating commodity prices. Motilal Oswal's analysts highlight a positive outlook for the Indian economy, driven by robust domestic consumption, improving corporate earnings, and supportive monetary policies. They emphasize that large-cap stocks, with their strong balance sheets and market leadership, are well-positioned to navigate volatility and deliver steady returns. The five picks—Bharti Airtel, ICICI Bank, HDFC Life Insurance, State Bank of India (SBI), and Larsen & Toubro (L&T)—are chosen based on factors like earnings growth, sector tailwinds, and valuation attractiveness. Each stock comes with a specific target price, implying upsides ranging from 10% to 23%, making them appealing for investors seeking quality bets in a potentially choppy market.

Starting with Bharti Airtel, the telecom giant is a standout pick due to its dominant position in the Indian telecommunications sector. Motilal Oswal points out that Airtel has been benefiting from recent tariff hikes, which are expected to boost average revenue per user (ARPU) significantly. The company has implemented price increases across its prepaid and postpaid plans, a move that follows years of intense competition and price wars in the industry. This, combined with Airtel's aggressive expansion in 5G infrastructure, positions it for strong revenue growth. Analysts forecast that ARPU could rise to around Rs 250-300 in the coming quarters, driven by higher data consumption and premium service adoption. Furthermore, Airtel's enterprise business and African operations are adding to its diversified revenue streams. The brokerage has set a target price of Rs 1,600 for Bharti Airtel, suggesting an upside of approximately 20% from current levels. This optimism is underpinned by the company's improving profitability metrics, with EBITDA margins expected to expand as operational efficiencies kick in. Risks such as regulatory changes or competitive pressures from rivals like Reliance Jio are acknowledged, but Airtel's market share gains and debt reduction efforts make it a resilient choice.

Next on the list is ICICI Bank, one of India's leading private sector lenders. Motilal Oswal's recommendation is fueled by the bank's solid asset quality and consistent loan growth. In the post-pandemic recovery phase, ICICI Bank has demonstrated strong performance in retail lending, including mortgages, personal loans, and credit cards, which form a significant portion of its portfolio. The analysts highlight the bank's net interest margin (NIM) stability, which has remained healthy despite rising interest rates, thanks to a favorable deposit mix and efficient cost management. With India's economy projected to grow at 7-8% annually, credit demand is expected to remain robust, benefiting players like ICICI Bank. The brokerage also praises the bank's digital transformation initiatives, which have enhanced customer acquisition and operational efficiency. A target price of Rs 1,400 has been assigned, implying a 15-18% upside. This valuation takes into account improving return on equity (ROE) and a declining non-performing asset (NPA) ratio, which has dropped to multi-year lows. Potential headwinds include interest rate volatility and economic slowdowns, but ICICI Bank's diversified business model and strong capital adequacy ratio provide a buffer.

HDFC Life Insurance emerges as another key pick, representing the insurance sector's growth story. Motilal Oswal notes that the life insurance industry in India is underpenetrated, with rising awareness and financial literacy driving demand for protection and savings products. HDFC Life, post its merger with HDFC Ltd., has strengthened its distribution network and product offerings, positioning it for market share gains. The analysts project healthy growth in annual premium equivalent (APE) and value of new business (VNB), supported by bancassurance tie-ups and digital channels. With increasing focus on term insurance and unit-linked plans, the company's margins are expected to improve. A target price of Rs 800 is recommended, offering up to 23% upside, the highest among the picks. This is based on embedded value growth and favorable regulatory environment, including potential tax benefits for insurance products. Challenges like competition from peers and market-linked volatility are mentioned, but HDFC Life's strong brand and parentage from HDFC Bank give it an edge.

State Bank of India (SBI), the country's largest public sector bank, is included for its turnaround story and vast reach. Motilal Oswal emphasizes SBI's improving asset quality, with gross NPAs reducing substantially due to better recovery mechanisms and provisioning. The bank's extensive branch network and government linkages provide a competitive advantage in deposit mobilization and lending to priority sectors. Analysts anticipate loan book expansion in retail, agriculture, and MSME segments, aligned with India's infrastructure push. With NIMs expected to hold steady and fee income rising, earnings visibility is high. The target price is set at Rs 1,000, suggesting a 12-15% upside. SBI's role in national development projects and digital banking initiatives further bolsters its case.

Finally, Larsen & Toubro (L&T) rounds out the picks, capitalizing on the infrastructure boom. As a leading engineering and construction firm, L&T is poised to benefit from government spending on roads, railways, and urban development under initiatives like Bharatmala and Smart Cities. Motilal Oswal highlights the company's order book growth, which has swelled to record levels, ensuring revenue visibility for years. The hydrocarbon and IT services segments add diversification. A target price of Rs 4,200 implies a 10-12% upside, driven by margin improvements and execution efficiency.

In summary, Motilal Oswal's August picks reflect a balanced portfolio across telecom, banking, insurance, and infrastructure sectors, emphasizing companies with strong fundamentals and growth catalysts. Investors are advised to consider these amid a bullish yet cautious market sentiment, with potential for double-digit returns. The brokerage stresses the importance of monitoring macroeconomic indicators and corporate earnings for sustained performance. This selection underscores the attractiveness of large-caps in providing stability and upside in uncertain times, making them suitable for long-term portfolios. (Word count: 928)

Read the Full The Financial Express Article at:
[ https://www.financialexpress.com/market/motilal-oswals-5-large-cap-picks-for-august-with-up-to-23-upside-bharti-airtel-icici-bank-hdfc-life-3943659/ ]