IT growth vectors "clearly missing"; EV capex pullback hits ER&D players: Mayuresh Joshi

India's IT services and engineering research and development (ER&D) sector is facing fresh headwinds, according to Mayuresh Joshi, Head of Equity at Marketsmith India, who cautioned that the pain isn't isolated to individual companies but reflects a broader structural slowdown.

EV capex cuts are rippling through IT

Speaking to ET Now, Joshi pointed to recent developments at KPIT as symptomatic of a larger problem facing ER&D-focused technology players. He explained that expectations of revenue decline may reflect a pullback in EV investments that had previously been frontloaded over recent quarters, with reports suggesting several players have substantially cut back capital expenditure plans in both European and North American markets.

This matters because when automotive OEMs slow their EV investment plans, the impact cascades downstream. As Joshi put it, as the pullback happens from the OEM side, software and ER&D providers — including companies like KPIT — inevitably feel the ripple effects.


Compounding the uncertainty, Joshi flagged near-term macro risks. He noted that the first half of the year is clouded by uncertainties tied to the West Asian crisis, inflationary pressures, and a recent 25 basis point rate hike by the European Central Bank, making an aggressive recovery unlikely and putting annualised growth numbers off track. His blunt assessment: growth catalysts for the IT sector as a whole are currently absent.

Metals: A "wait and watch" sector

On metals, Joshi struck a neutral, stock-specific tone. He observed that the geopolitical risk premium built into ferrous and non-ferrous base metal prices is now unwinding, with aluminium facing additional pressure as commercial production ramps up at new Middle Eastern facilities, adding to global supply.

That said, he sees a silver lining further out. Current inventory levels across the sector remain low, and once demand recovery triggers a restocking cycle, better London Metal Exchange (LME) pricing could positively impact operating leverage for producers. For now, though, supply increases and pricing pressure — partly driven by Chinese commodity exports into global markets — are likely to weigh on near-term sentiment.

Kotak-StanChart deal: Fair price, uncertain payoff

Turning to banking, Joshi offered a measured take on Kotak Mahindra Bank's acquisition of Standard Chartered's India retail business. Without full financial disclosures, he said it's difficult to assess precisely how earnings-accretive the deal will be, though based on available estimates, the price paid appears reasonable for the acquired business.

The bigger question, he added, is execution, specifically how well Kotak can build synergies in current-account-savings-account (CASA) growth and its core banking business. Drawing a parallel to past deals like Axis Bank's acquisition of Citi's consumer business, Joshi suggested the upside from such integrations is typically incremental rather than transformative, though a fairly priced deal remains a sentimentally positive signal for Kotak.

Despite management's claims that the deal is return-on-equity (ROE) accretive, Joshi isn't rushing to buy Kotak stock at current levels near ₹375, maintaining a neutral stance on large private banks overall.

Where the real opportunity lies: Mid-sized private banks

Instead, Joshi is more bullish on mid-sized private banks, which he believes are better positioned on balance sheet management, deposit growth, and asset quality — translating into stronger net interest margins and returns. He specifically named Karur Vysya Bank as a continued portfolio holding.

Broking stocks face RBI headwinds

On capital market intermediaries, Joshi acknowledged that new RBI capital exposure norms would create near-term sentimental pressure on broking companies, with performance hinging on client acquisition trends and steady transaction revenues. Despite this, he remains structurally positive on capital market participants over the long term, naming fintech platform Groww as one of his top picks in the space.