What you are making of the overall auto theme? While a lot of companies are going all out to push their EV foray, the auto sales numbers that have trickled in are quite encouraging. Should one look at opportunities within the auto sector?
Auto is a very interesting sector. The heat of the commodity super cycle which is unfolding in crude and all the metals, is going to be felt by the auto sector. When petrol-diesel prices go up, cost goes up and one’s ability to spend on a monthly basis reduces. The consumer is getting impacted but when metal prices go up, the gross margin of the manufacturer comes down. In such a scenario, coupled with the fact that all the pent-up demand has been seen in the last four-five months, I would rather go with more economy driven rather than passenger driven companies now.
So, I would rather focus on
to start with as the commercial vehicle cycle will be much better over the next two to four years than what it was in the last few years. Second one to bet on would be Mahindra & Mahindra.
Where are you seeing opportunity within the midcaps?,
There are five areas within midcap that I like. To start with, businesses or companies which are digitally challenging the existing business or disrupting the business — even if slightly overvalued — are going to have very good growth and I continue to like them. Tanla is one of these.
I also like domestic focussed midcap pharma because their risk on any US-related issues are very less and domestic pharma is doing well. Among them, I like Eris Life Sciences.
As a theme, I very strongly believe that the turnaround has started in residential real estate. It is here to stay for the next three to five or more years. So, all the suppliers — be it tiles, switchgears, switches, cables, pipes so on and so forth — which go for residential real estate, should continue to do very well and see very good demand. They will continue to do very well within the midcap space.
And the fourth category which I like is also about the PLI segments where manufacturing is going to grow more in India.
Last but not the least is the chemical segment where we like NOCIL, we like Phillips Carbon Black, above all we like stocks like GNFC. In all these five segments, midcaps will offer great opportunity to make money.
