Selective stock picks to outperform amid earnings recovery: Mayuresh Joshi

After a disappointing showing by broader markets in 2025, investors may finally be looking at the early stages of a recovery driven by improving earnings visibility. Mayuresh Joshi, Head Equity, Marketsmith India believes markets could rebound over the next few quarters as earnings begin to normalise.

“Largely after the performance of the broader markets, which has been a tad disappointing for 2025, our take is that markets might actually show a rebound based on the earnings trajectory. A large part of the market could start recouping in the next few quarters. Q2 has been relatively resilient, and therefore Q3 numbers will be keenly watched. Apparent signs of a turnaround, if seen in Q3 and the second half, would lay the base for 12% to 14% consensus earnings growth, which is being pencilled in by most analysts. Select sectors and select stocks might therefore continue to do well,” he said in an interview to ET Now.

According to Joshi, internal sector rotation models are already throwing up opportunities in specific pockets. “On our sector rotation graph at PANARAY on Marketsmith India, which we closely track, several thematic indices are showing strength. Consumer discretionary is coming back very strongly, select BFSI names are looking durable in terms of earnings recovery, and a few infrastructure stocks also look promising.” Within consumer discretionary, Vishal Mega Mart stands out as a proxy play. “Based on Q2 numbers, EBITDA margins in the first half have improved significantly to around 9.4–9.5%, while sales have grown by about 12%. With consumption expected to come back strongly, especially post GST rationalisation, and given the company’s mix across apparel and FMCG, the positioning looks favourable,” he noted.

On the financials side, Joshi reiterated his long-standing preference for select lenders. “We have always been propagating Shriram Finance from the NBFC universe, and we hold this stock in our global portfolios. Select PSU banks could also continue to do well. Bank of Maharashtra, for example, which we hold in both domestic and global portfolios, has seen cost-to-income ratios come down, asset quality pressures reduce quarter after quarter, and provisioning remain strong with a PCR of about 98%. Tier-I ratios are very strong at around 14%, which gives us confidence that if the current earnings run rate continues, expectations of better ROAs and ROEs should play out.”

Auto ancillaries are another segment where Joshi sees selective opportunities, with Uno Minda being a preferred pick. “Auto ancillaries should continue to do well selectively, and Uno Minda is something we continue to like based on its ratings and rankings on Marketsmith India. The company has integrated facilities, and content per car is expected to go up three-fold over the next few years. They are building EV-agnostic platforms, giving them a good mix of ICE products at present and EV systems going forward. Content per car could double or even triple over the next few quarters and years,” he explained.

Elaborating on the auto theme, Joshi highlighted structural tailwinds from EV adoption. “A new plant is coming up, and they already operate integrated facilities. EV penetration for four-wheelers has reached about 5% for the industry and around 9% for two-wheelers, with volumes crossing one million units in FY25. This penetration should only rise. The components Uno Minda manufactures—airbags, seating, lighting—are all relevant for the EV ecosystem. As the ecosystem develops, they are already future-ready with products across the EV value chain. At the same time, ICE products will continue, and with the tilt towards EVs, content per car could move from around ₹12,000–15,000 to as much as ₹35,000–40,000 over time. Even a doubling over the next 18–24 months would meaningfully lift topline, while integrated facilities should support gradual margin expansion through operating leverage.”
Turning to tyre stocks, Joshi said improving auto sales and favourable cost conditions are supportive. “If OEMs are doing well, tyre companies will also do well. They benefit from OEM demand and from the replacement market, where pricing power and margins are stronger. The replacement market remains resilient. With PVs and two-wheelers doing well and CVs now picking up across both M&HCVs and LCVs, the entire tyre ecosystem is on a stronger footing. Input costs have remained relatively benign, which further aids margins.” Within the space, Joshi highlighted select names. “JK Tyre and Apollo Tyres show strong ratings and rankings on Marketsmith India. A large portion of their revenues comes from the replacement market. For JK Tyre, CVs form a significant part of the product mix, followed by PVs and two-wheelers, with exposure to both OEM and replacement demand. Apollo Tyres also has international operations, which should perform better over the next couple of years. Innovations in EV and green tyres could further support earnings as we head into Q3.”

Overall, the strategy remains focused on selective sector rotation rather than broad market exposure, with earnings recovery, operating leverage and balance-sheet strength emerging as the key drivers for the next phase of market performance.