Stick to defensive and quality themes amid volatile global setup: Mayuresh Joshi

Indian equity markets have staged a strong rebound of nearly 10% from their March lows on the Nifty, prompting investors to reassess opportunities at current levels. While the broader sentiment has improved, market participants are becoming increasingly selective, focusing on earnings visibility, balance sheet strength, and sectoral tailwinds.

Speaking on ET Now, Mayuresh Joshi, Head Equity, Marketsmith India highlighted that the current phase of the market favors businesses with consistent earnings delivery and structural growth drivers, especially in a mixed global demand environment and evolving input cost dynamics.

“Our own sense is that a few sectors which are showing signs of inherent strength where earnings might probably be a little bit more consistent both in terms of Q4 earnings delivery as well as expectations in terms of the second order effects when it comes to input cost inflation and demand dynamics on Q1 as well, I think power clearly stands out,” Joshi said.

He pointed to the entire power ecosystem as a key area of interest, including generators, transmission companies, and select ancillary players. According to him, the sector benefits from sustained demand visibility and improving structural trends.

At the same time, he maintained a cautious but constructive stance on pharmaceuticals, calling it a defensive pocket in an uncertain environment. “At the same time our own sense is that pharma does become a sort of a defensive bet where earnings probably can remain far more stable compared to the rest of the pack,” he added.

Within financials, Joshi emphasized a very selective approach, particularly favoring mid-cap PSU banks over other segments.

“Very-very selective in terms of BFSI. Within BFSI our own sense is that the midcap PSU banks might actually fare better as we head into the next few quarters both in terms of valuations, the ratings, and rankings that we see at Marketsmith India and expectations in terms of earnings delivery as well,” he noted, adding that banks such as Bank of Maharashtra, Bank of Baroda, Bank of India, and Indian Bank remain on the radar based on their recent performance trends.He also identified niche engineering, manufacturing, and mining companies as potential outperformers in the current cycle.

Among specific stock ideas, Joshi highlighted Sai Life Sciences within the pharma space. “Sai Life Sciences is something that we continue liking. It is a very good CRDMO play. Our own sense is that the kind of clientele that it probably got, the order book that it is sitting on, the gross margins that it probably delivers, and the EBITDA margins as well along with return ratios might actually hold up,” he said.

On the mining and power-linked theme, he pointed to Godawari Power as another key idea. “Mining companies might continue doing well… with clearances probably getting received will mean and will obviously amplify the kind of volume growth that is probably expected,” he said.

He further added that domestic demand drivers such as power consumption and the rising data centre ecosystem are expected to support growth. “In Godawari Power, all these elements probably take place, realisations better than most market realisations, completely backward integrated unit… and therefore from a balance sheet perspective looks extremely strong,” Joshi explained.

Addressing concerns around newer growth areas such as battery energy storage systems (BESS), Joshi acknowledged the capital intensity but downplayed near-term risks to profitability.

“The capex that is probably required for creating and establishing BESS facilities are quite large at this juncture. But it is going to be the need of the hour as we head into the next few years,” he said, adding that investments are likely to be staggered and will not immediately impact return ratios.

On the IT sector, Joshi remained cautious, citing weak commentary and emerging revenue pressure. “The commentaries have been quite muted honestly and therefore we have stayed away from the entire pack to a large extent,” he said.

He highlighted that while global hyperscalers are investing heavily in AI, Indian IT firms are likely to benefit mainly at the application layer. However, he warned of near-term disruption. “It might hold out in terms of numbers as far as constant currency is concerned… but again this disruption is something which will genuinely cause some element of earnings disruption,” he noted.

In contrast, FMCG has shown resilience, with Nestle delivering a strong set of results, including robust revenue and profit growth. “Very strong set of numbers from Nestle… the numbers across were a huge beat and therefore the management commentary is very supportive,” Joshi said.

However, he flagged input cost pressures from milk prices, crude derivatives, and logistics as key monitorable factors going forward, along with monsoon performance impacting rural demand.

While not holding FMCG stocks currently, Joshi said Tata Consumer and CCL Products remain on his watchlist due to their diversified portfolios and global expansion strategies, particularly in coffee products.

Overall, the market narrative continues to shift towards selective stock-picking, with investors focusing on sectors offering structural growth, pricing power, and balance sheet strength amid a still-evolving macroeconomic backdrop.