The market correction has thrown up opportunities in stocks ranging from Paytm’s parent One97 Communications to auto ancillary maker Jamna Auto and Karur Vysya Bank, according to Amit Gupta, director and head of equities at Motilal Oswal Private Wealth.
Gupta sees a potential earnings boost for One97 if merchant discount rates (MDR) are introduced on Unified Payments Interface (UPI) transactions. He also expects a recovery in commercial vehicles to benefit Jamna Auto, while improving asset quality and profitability make some mid-sized southern banks attractive.
Speaking to CNBC-TV18, Gupta said investors should focus on companies where business conditions are improving but share prices have yet to reflect the change.
Why Gupta sees potential in Paytm’s parent
The potential introduction of charges on UPI transactions could add around ₹600 crore to One97 Communications’ earnings before interest, taxes, depreciation and amortisation (EBITDA), Gupta estimated. This would be over and above the roughly ₹1,000 crore he expects from the company’s existing business.
His estimate comprises around ₹400 crore from merchant-side transactions and ₹200 crore from consumer-side transactions. For the merchant business, he used a gross merchandise value (GMV) of about ₹5 lakh crore and a 20% market share, with the assumed charge translating into eight basis points. On the consumer side, he cited transactions worth around ₹2 lakh crore.
Gupta said the potential addition could increase EBITDA by nearly 60% over expectations. He also argued that UPI’s widespread use would limit the risk of a substantial decline in transaction volumes if charges were introduced.
“UPI is not like credit cards, where transaction volumes accounted for only 2-3% of the total,” he said. “Here, UPI accounts for almost 50-60%, and that is why I do not think transactions will come down.”
The earnings upside, however, remains contingent on whether UPI charges are introduced and on the assumptions underpinning Gupta’s estimates.
Jamna Auto could benefit from a commercial vehicle recovery
Gupta is also tracking Jamna Auto, whose share price, he said, has remained largely stagnant over the past three to four years. A recovery in commercial vehicles could provide a fresh growth trigger for the suspension-component maker.
Commercial vehicle numbers have recently risen 39% year-on-year, Gupta said, attributing the improvement partly to activity in manufacturing and mining. A sustained recovery could lift demand for components supplied to commercial vehicle manufacturers.
He sees an additional opportunity in the shift from conventional leaf springs to parabolic springs, which generally weigh less and have lower friction. Gupta estimates that Jamna Auto commands around 85% of the parabolic spring market.
A potential free trade agreement with Europe in financial year 2027 could offer another catalyst, he said, pointing to the company’s existing links with European manufacturers Volvo and Daimler.
“The stock has not gone anywhere, and it is trading at 18 times its FY28 earnings,” Gupta said.
Karur Vysya Bank stands out among southern lenders
In banking, Gupta favours select mid-sized lenders in southern India, citing improving asset quality, stronger loan growth and greater exposure to gold loans.
He said some banks had increased gold loans to nearly 35% of their loan portfolios, providing exposure to a segment that generally offers higher yields. He also pointed to stronger Tier 1 capital and valuations of around 1.5 times book value.
Gupta cited Karur Vysya Bank’s return on equity (RoE) of around 20%, compared with 14-15% at Federal Bank. Karur Vysya Bank’s gross non-performing asset (GNPA) ratio was around 0.7%, against 1.74% for Federal Bank, he said.
He also noted that private equity investors had begun taking positions in the banking sector, citing Federal Bank as an example. In his view, the combination of profitability, asset quality and valuations could attract further investment into selected southern lenders.
Market correction improves valuations, but risks remain
Gupta said the recent correction had made the broader market more attractive for long-term investors, although further weakness remained possible if the rupee continued to depreciate and foreign institutional investors (FIIs) sustained their selling.
He cited FII selling of nearly ₹40,000 crore in October and said the Reserve Bank of India was trying to contain the rupee’s depreciation.
According to Gupta, the Nifty was trading at below 19 times earnings if investors assumed growth of only 5% in financial years 2027 and 2028, compared with a 10-year average of around 20.7 times. If earnings growth reached 10%, the valuation would be closer to 17 times earnings, he said.
Despite the near-term risks, Gupta considers current market levels attractive for long-term investors, even under more conservative growth assumptions.
Pharma offers another area to watch
Gupta also sees opportunities in domestic pharmaceuticals, citing value growth of nearly 13.5% in the Indian pharma market and volume growth of 3.5%, which he described as a two-year high.
Cardiac drugs are showing stronger momentum, with volume growth reaching 9.5%, he said. Gupta estimated the cardiac drug market at ₹35,000-40,000 crore and put Torrent Pharma’s market share at around 10-11%.
He said restrictions affecting pharmacy operations could weigh on hospital companies in the near term because pharmacies contribute significantly to their revenues. Pharmaceutical companies, however, could attract investor interest during periods of volatility, particularly if hospital stocks come under pressure.