On auto sector
In the short term, some seemingly negative factors have developed for the industry. The crude prices have been going up; the second corona wave is around which could result in lockdowns resulting in reduced mobility. Plus, there is the whole electrical vehicle replacement thing that has been there for the last three years, if not longer. So sooner or later, some share of the industry will go to electrical vehicles.
Along with that, keep in mind the sharp rise of the share prices that had happened in the companies which were helped by the good financial numbers in the last two-three quarters. Auto stocks have already corrected 15% to 20%. In the short term, we can continue to see some uncertainty and some volatility in the stock prices which will again be linked to the markets as well as these news flows. If you look at the valuation of these companies, I will not necessarily compare them to the FMCG industry, but OEM manufacturers are big brands. These are business to consumer businesses which have built strong distribution networks, strong financial reserves and cash flow profitability. So for a medium term investor, at a certain price, this could be a good investment opportunity.
One tech company where the rich valuations are justified
Differentiate for me the IT services and the tech companies by example/
Platform companies like IndiaMart or a product company like Tejas, Intellect
So yes, all these tech companies are quite expensive on valuation and as a reference, I would go back 20 years in history. If we look at the valuation of all these IT services companies which we are talking of today also, Infosys and Wipro at that point of time used to trade at a PE ratio of 100 and then we started to value them on PE to growth ratio.
I think something similar is happening in the tech space in all these platform companies, all these fintech companies. Indiamart Intermesh is one name which I like. Let me add a disclosure that I do hold some little bit shares in my personal portfolio. It has a business model that will continue to do well. The management has been quite proactive in coming out with strategies and meeting with competition and giving newer products and strategies based on the Covid developments. The valuation is not comfortable but as I said we are keeping the valuation aside. So that is one stock.
