The two stories in the market are power and speciality chemicals. What do you sense is happening in the power sector?
A couple of things. One, a lot of expectation is building around some policy announcement by the government focussed on the distribution. This is one sector which the government has been trying to handle for quite some time. Remember the UDAY Scheme? I do not think it was a complete success but the distribution related problems need to be resolved for healthy growth of the power sector.
Some measures are eagerly awaited and we will have to see how that would streamline the distribution business which has been a major problem area for the power sector. Assuming that this policy does come, the beneficiaries will be a lot of power equipment and power related engineering companies. Brokerage reports are already out on Siemens and ABB, and revised targets have been set. Both are good companies and both have great potential considering that private capex and government capex are back and there can be a lot of movement and positive development in both these counters.
Also we like some of the power stocks with distribution linkages. We like NTPC in the PSU space. We believe it has got a long way to go and somebody is building a portfolio where they want to be a little safe. NTPC is a good buy even from a dividend yield perspective at current levels.
The other stock which we like in the power space is Tata Power. They have a large distribution play and also both NTPC and Tata Power are focussing on renewable energy which does give them a leg up, going forward.
What are you pencilling in when it comes to the auto sales numbers? We are working with the expectations that there will be some sort of an incremental recovery in June,
There will be better performance in terms of numbers from the auto companies in June vis-à-vis May. May did see major lockdowns across the country in multiples states. But June things have started opening up and the numbers will be better in June. But having said that, in the entire quarter Q1, which is ending today, the numbers will be subdued compared with Q4 last fiscal. But a lot of buying by the auto majors is expected during the coming months or Q2. We will have to carefully see the commentary from the companies.
Also one particular pocket we are bullish on in the auto sector is tractor.
Rural India is seeing good traction. Agriculture is expected to show good results on the back of good monsoon and so tractor sales numbers will be keenly watched. Mahindra in that context, stands out and we definitely like Mahindra at current levels, both for the tractor as well as SUV and commercial vehicles. Overall we do like the commercial vehicle space. The commercial vehicle demand is expected to pick up with the reopening of the economy and commercial vehicle manufacturers also will stand doing well.
In this space, we like Ashok Leyland. The price has moved up substantially from where it was a few months back but commercial vehicle pick up and also the uniqueness of Ashok Leyland is bus manufacturing, where they have nearly 50% market share. They are exporting their buses to nearby countries as well. Ashok Leyland can be looked at current levels as well. Now on a slightly broader theme, we like the auto ancillary companies, particularly the companies having presence in the global markets. Motherson Sumi and Bharat Forge continue to remain our favourites even at current levels.
