Motilal Oswal Private Wealth deploys cash into power, auto ancillary themes

With markets showing resilience despite crude oil hovering near $105–110 per barrel, Motilal Oswal Private Wealth has begun deploying cash that had been sitting on the sidelines. Amit Gupta, Executive Group Vice President at the firm, says portfolios had been holding 20–25% in cash, and that capital is now being put to work across select high-conviction themes.

Power is the top theme. Gupta's primary allocation is going into power. The rationale is straightforward: an intense summer season, possible El Niño impact, and surging electricity demand. Peak power demand hit 242 gigawatt last year. It has already touched a new high of 256 gigawatt this year and is expected to reach 271 gigawatt. AC sales are expected to spike, pushing electricity demand growth from a negligible 1% last year to potentially 5–6%.

Within power, renewables, particularly solar, stand out. India's Central Electricity Authority projects total energy capacity doubling from 538 gigawatt to 1,121 gigawatt over the next decade. Solar alone is expected to grow 255%, from 143 gigawatt to 509 gigawatt. Gupta's preferred plays are companies pursuing backward integration into solar manufacturing, ingots, and wafers, businesses where margin expansion is visible and structural.

Auto ancillary: An underappreciated export story. Gupta's second high-conviction sector is auto ancillary, specifically export-oriented companies set to benefit from upcoming Free Trade Agreements with Europe and the UK, expected to be finalised in FY27. Within this space, he highlights a niche opportunity in decorative aesthetics, components that enhance the look and luxury feel of vehicles rather than core mechanical parts. These businesses carry margins of 24–30% and several are available at market caps of around Rs 5,000 crore, offering significant room for growth.

Textile exports are also on his radar for similar FTA-driven reasons, particularly in the mid and smallcap space.

On financials, Gupta favours mid-size private sector banks, particularly those based in south India with 900–1,000 branch networks. His reasoning is backed by numbers: some of these banks are growing credit at 17% against an industry average of 11–12%, achieving deposit growth of 16%, return on assets above 2%, return on equity of 18–19%, and gross NPA ratios as low as 0.7%. He is more cautious on PSU banks in a rising bond yield environment, noting their larger government securities holdings could dent treasury profits. On the new ECL provisioning framework, he takes a constructive long-term view — more provisioning means fewer negative surprises, which ultimately supports consistency of returns across the banking index.

Motilal Oswal Private Wealth currently has no IT exposure, though Gupta acknowledges valuations are compelling; TCS trades at around 16 times earnings with margins still at 24–25%. The problem is not order books but execution. Project delays are preventing revenue conversion. Among large IT companies, AI exposure in order books has grown from 5–5.5% to 7.5% at TCS, but overall penetration remains low. Gupta believes midcap IT could recover faster given their greater agility on AI execution.

With no direct AI pure-plays listed in India, Gupta points to three indirect routes: data centre equipment and server ancillary companies, genset manufacturers supplying uninterrupted power to data centres, and rare earth companies. India holds approximately 8% of global rare earth reserves, critical minerals required for semiconductors, and these stocks have already begun outperforming since China tightened export restrictions.