Speaking to ET Now, Joshi said HAL’s massive order book provides strong revenue visibility over the next few years, but recent news flow around key tenders and clarifications has temporarily unsettled sentiment.
HAL: Strong order book, gradual margin story
HAL currently trades at around 30 times trailing earnings, a valuation Joshi considers expensive in the near term.
While revenue growth could compound at a healthy pace due to execution of its large defence order pipeline, margin expansion may not match that trajectory immediately. According to Joshi:
Margin improvement is likely to be gradual as operating leverage kicks in. High-margin orders and O&M (operations and maintenance) contracts offer long-term visibility.
Periodic quarterly misses are common in defence companies due to execution cycles, elections, or even monsoon-related disruptions.
“The industry looks well poised with adequate budget allocations and strong order inflows,” he noted, but added that investors should allow the stock to consolidate further before taking fresh exposure.Marketsmith India currently has HAL “on radar,” but prefers clarity on both macro and micro developments before turning aggressive.
Midcap IT: Selective opportunities amid AI disruption
On the IT space, Joshi said investors must be “very selective” as the sector navigates disruptive shifts driven by artificial intelligence.
He highlighted that while AI contribution to largecap IT revenues remains modest for now, certain midcap players are positioning themselves ahead of the curve.
KPIT Tech: Valuations cooling, Growth intact?
Referring to KPIT Technologies, currently trading at around 25 times one-year forward earnings, Joshi acknowledged that valuations have corrected meaningfully.
Key positives include:
- Strong exposure to ER&D (Engineering Research & Development).
- Tailwinds from electric mobility, automation platforms, and product engineering.
- Potential gains as generative and agentic AI adoption scales toward FY27.
Companies agile in adopting AI across application layers, rather than just experimenting with it, may emerge as clear differentiators, he said.
Other names on the radar
Joshi also mentioned:
- Mphasis, for its expanding AI-led capabilities.
- Datamatics, which he described as an under-the-radar midcap building AI backbone support for digital operations globally. It’s focus on generative and agentic AI models, along with cloud integration and a healthy cash position, makes it structurally interesting, according to Joshi.
The broader message: valuations may be correcting, but stock selection in IT must focus on technology adaptability, not just multiples.
Banking trust under scrutiny: IDFC First in focus
On concerns around governance issues at IDFC First Bank, Joshi struck a cautious tone. He said banking fundamentally operates on trust, and any isolated incident—whether described as a “one-off” or not—can erode that trust significantly.
Key points to watch:
- Outcome of potential forensic audits.
- Broader system-level checks for procedural loopholes.
- Regulatory stance from the RBI.
Joshi pointed to past cases like Yes Bank, where trust erosion took considerable time to repair despite resolution efforts.
“Valuations alone are not enough,” he said, adding that restoring credibility is a gradual process. For now, he sees a phase of consolidation for IDFC First Bank until clarity improves.
Bottom line for investors
HAL: Strong long-term order visibility, but expensive and in consolidation mode.
Midcap IT: Selective buying opportunities in AI-aligned companies like KPIT, Mphasis, and Datamatics.
IDFC First Bank: Trust repair and regulatory clarity will determine the trajectory more than valuation comfort.
In a market shaped by defence spending tailwinds, AI disruption, and episodic banking stress, Joshi’s message is clear: stay selective, stay patient, and focus on execution visibility over headline volatility.