How are you approaching the realty theme? Many brokerages are talking about how not just realty but the ancillaries and construction companies are bound to get a good fillip as they have underperformed and lagged the rest of the market for a while. Along with residential sales, you will see non-residential sales as well. Are ancillaries like Asian Paints Havells something to be looked at?
Real estate has been a surprise, even for us. Home sales have improved over last six-seven months, thanks to lower cost of funds and also resurgence in the economy which has really helped many people to look out for homes. This was not expected because the economy had come to a screeching halt and people were worried whether there would be huge job losses.
Fortunately for the Indian economy at least, there have not been too many job losses. In fact, there has been an improvement in employment generation, starting from the technology sector and that has led to significant resurgence in some of the cities like Bangalore, Pune and Noida, Gurgaon and even Mumbai.
The state government’s efforts to reduce stamp duty has further helped to reduce the cost of buying and that has led to a significant movement in the real estate sector. If the economy continues to do well and employment generation continues, then the real estate companies, paint companies, adhesive companies and building material companies all will do well if they have resources like raw materials, labour in place.
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If they are financially very strong, one big thing that has happened across the board is a significant shift in market share from unorganised to organised players and that is where the listed companies have been benefiting by gaining market share all across. Some of these companies have improved their market share and are able to demonstrate really good numbers vis-à-vis the valuations they are trading at.
Where within the auto sector would you find bullish bets and where do you see underperformance or under ownership?
The way the world is moving in the auto space, a lot of consumer demand is coming in the EV side. So, even in two-wheelers or even in four-wheelers, globally, especially in China and the US, there has been a lot of consumer related demand for electric vehicles and the companies will have to move to what consumers want. If companies are not able to change that mindset, it will become difficult for them to continue to maintain market share. The companies which are able to move to that side, and understand that may be in the next three, four, five years, this is what consumers are going to ask for and there is an infrastructure laid down by the government, then clearly those companies will benefit and do well.
So it all boils down to consumer demand. In China, the EV penetration has gone through the roof, even during the lower growth phase of the last one month or two. EV growth rates have been very high, coming from a lower phase. I think the consumer is becoming more cautious about the environment and that is where the auto companies will have to benefit.
I would say some of the auto ancillaries which are either neutral to this change in technology or are part of the EV ecosystem will do pretty well and some of the traditional OEMs who are embracing this change will also do very well.
