Speaking to ET Now, Maheshwari said the excise duty increase came as a major surprise, both in terms of timing and magnitude, especially with the Union Budget just weeks away. “Nobody was expecting such a sharp hike outside the Budget. The shock element is what has led to a strong market reaction,” he said.
Cigarette sector faces pressure as price hikes loom
Maheshwari noted that cigarette companies may need to raise prices by 15–25% to fully offset the higher duty, which could hurt volumes in the short term. “Passing on such a sharp increase to consumers will not be easy. Some part will be absorbed, and some will be passed on,” he said.
He added that consumer downtrading is likely, with smokers shifting to smaller variants or cheaper options within the same brand. While a small price-insensitive segment may remain unaffected, the broader market could see temporary volume pressure. As a result, cigarette stocks are likely to underperform in the near term, even though history suggests the industry eventually absorbs steep tax hikes.
QSR consolidation seen as positive
On the consolidation between Devyani International and Sapphire Foods, Maheshwari said the move makes strategic sense. “Globally, Yum! Brands operates under a single entity. In India, having two separate operators was inefficient. Consolidation should create synergies,” he said, while cautioning that the projected benefits of around ₹200 crore will take time to materialise.
Autos remain a key beneficiary of GST cuts, rate easing
Maheshwari remains constructive on the auto sector, highlighting that the GST cut was structural rather than a one-time boost. “Vehicles have effectively become cheaper by ₹1–2 lakh, and interest rates are coming down. These are strong tailwinds,” he said.
His preference order within autos is passenger vehicles first, followed by electric vehicles and two-wheelers. Among individual stocks, he named Mahindra & Mahindra as his top pick in passenger vehicles, Ashok Leyland as a strong EV play, and TVS Motor in two-wheelers. He prefers OEMs over distributors, with selective exposure to auto ancillaries.
IT still lacks earnings triggers
Maheshwari struck a cautious note on the IT sector, saying the AI theme has yet to translate meaningfully into services revenue. “AI investments are still largely product-led. Services-led monetisation may take another two to three quarters,” he said.
He added that earnings upgrades remain limited, with most analysts expecting only high single-digit growth. “Valuations are already factoring that in, and PEG ratios above two do not offer an attractive entry point,” he said.
Banking, markets, metals seen offering value
Among other sectors, Maheshwari sees banking and broader BFSI as offering favourable risk-reward, even though insurance is relatively less attractive. He also expects a rebound in stock market-related plays as trading volumes recover alongside a rise in benchmark indices.
On metals, Maheshwari believes the rally that began with precious metals could now spread to non-ferrous and ferrous segments. “Asset ownership is making a comeback. For at least a quarter, metals should continue to perform well,” he said.
Realty may stay range-bound despite healthy demand
While acknowledging strong on-ground demand in both residential and office segments, Maheshwari said real estate stocks have underperformed due to slowing growth rates and still-rich valuations. “Growth has moderated from last year’s levels, and valuations remain elevated. Realty may move sideways until growth re-accelerates,” he said, adding that he remains optimistic over the medium term.