How are you looking at the entire leisure, travel and hotel industry? Will the market start factoring in the gradual reopening now?
A lot of them are deep recovery plays. So there is an excitement around the decline of the second wave of Covid. The first and the second wave are quite different from each other. When the first wave subsided, the general perception was that the second wave will be much smaller and much weaker if at all. Now this time there is a fear of further mutations even after the second wave subsides. So some of the recovery plays will remain challenged for a longer period of time than what we assumed when they were coming out of the first wave of Covid. Also let us not forget that habits in terms of food ordering or OTT have changed for a longer period now. It has to be seen as to what long-term changes in behaviour it brings in the consumer. One needs to see whether multiplexes will be replaced with something else, something more digital.
Do you think cyclicals have more juice left on the upside?
Cyclicals include banks, real estate, commodities and the capitals goods sector. You have to evaluate each one of them on the basis of their own fundamentals. Broadly, there are genuine fears of inflation going up in the developed markets. And if that puts pressure on global yields, then cyclicals will do better as compared to growth stocks.
How would you analyse the prospects of auto stocks for the next 12-18 months?
We have to see what happens in two-wheelers and how much is the disruption through electric vehicles. Entry level cars are probably the safest place right now in autos and then comes CVs and tractors. In the order of priority, one would look at CVs, tractors, personal cars and passenger vehicles as better than two-wheelers given that the scale of disruption of electric vehicles is going to take longer and is less visible right now. Commercial vehicles and tractors did well last year too. If the investment cycle picks up, both in the public as well as the private sector, then you could be entering into a positive CV cycle.
You have to look at each segment separately and not get carried away by autos as a generic theme because each company and each segment is grappling with very different kind of issues. The drivers for demand are also different.
