Sectoral rotation has taken place in the market and perhaps the ones that have been underperforming will now start taking the lead as the markets move forward. Do you believe that IT, metals and the usual momentum trades could perhaps take a backseat now and the banking names take the lead in the bull market going forward?
Sectoral rotation is visible since the consolidation of the last two months and especially in the August series where IT was the best performing sector. And now post the consolidation, valuation is playing a catch up role and driving the bull run into all the sectors. Now it seems that one or other positive outcome or announcement or news flow is showing that this sector has not performed well and that is why the valuation is not catching up.
The real estate sector is in limelight in this dull market and only because the Mumbai property registration has soared up for the third consecutive month. All the stocks like
, which are dominant players and debt free companies are in the limelight.
I feel that once this sector moves up by 10-15%, then there could be a consolidation and some profit booking. All the sectors are not participating at the same time but yes the indices engine is moving and rest is following them and Nifty is at 17,000 levels.
Do you see more pain for the auto space because Maruti, Tata Motors, M&M all are saying that they are going to cut production. Maruti, in fact, has already cut production by 60%. So even if there is demand, do you think the problem will be that these car companies are not being able to cater all of this demand?
The auto sector is facing the tough issue of semiconductor shortage and hence the production may remain sluggish. Overall, demand may pick up, but manufacturing constraints will remain there. But as and when the economy gets unlocked, with the festive season on the cards, we may see some bump up activity in the auto sector — two-wheelers, four-wheelers apart from tractors.
But the rest — PV, CV, MHCV — all these companies will have better days on festive demand. And the pandemic has definitely boosted the demand for two wheelers as well as passenger vehicles and with the new norms of insurance, commercial vehicle demand may inch up.
The situation is similar with the manufacturing sector which is showing good uptick across the sectors. All activities are picking up and plants are running at almost 80- 90% capacity across the businesses. I think that will drive demand for commercial vehicles as well. Overall, the valuation is still not so expensive for auto four-wheelers and the commercial vehicle manufacturing companies.
We have seen some disappointment in Mahindra & Mahindra and Maruti due to chip shortage in August but I think it will be on track from October, November onwards.
