What about your outlook when it comes to fundamentals. It has been pretty much status quo for the equity market this week. Broader markets have done a lot of heavy lifting but Dalal Street has been stuck in a very tight range. Will this trend continue for some time and should one take comfort in the fact that there are no wild gyrations at least on the downside?
Yes. Overall, if you see, the expectation is lower for the second half of the year. The market has done well in the first half and practically, the year’s gains were made by mid-Feb for global markets as well as our markets. We saw the last top around February 16-17. The year’s gains had been made and then we saw the market take a breather, going down and then sideways, and then slowly climbing back to all-time highs. In Bank Nifty, we have not reached that level still. That is the 37,000-plus level, which was the all-time high. Overall, what is the market showing us? It is taking a breather, which is normal in a bull market? The trend is still positive. Growth is there. Growth is unequal. China led the growth. It is seeing a bit of a slowdown. The US is just emerging very fast and there is very strong growth there. Europe is doing a catch-up. Europe is expected to just start taking off in the next two months. Emerging markets are lagging. Latin America is emerging faster.
I was talking to somebody out of Mexico earlier this week. He was saying they have not had any lockdowns. They have not cut out any country’s travelers from coming in. He said that out here, it looks like there is no Covid-19 and we have got the economy running. The central bank has just hiked the rate. Brazil and Mexican central banks are hiking rates as well. So there is an unequal recovery globally.
Within India, there is an unequal recovery sectorally, which makes it very much a stock picker’s market. The market per se might not move too much. You might see Nifty50 trying to reach the 16,000 level, maybe going to 16,200 and then again consolidating. But if you are choosing the sectors and the stocks well, there are a lot of opportunities. There is some caution on the smallcap and microcap fronts because a lot of very fast and furious run-up has happened there. There are some cases in which the cash flows are not justifying the kind of run-up that is happening but that will happen with the momentum.
The IPO market is very strong. Is it in a mid-bull kind of a scenario, definitely not a late-bull one. Valuations are not out of whack, and not out of the charts, but are still quite compelling and seeing post-listing gains. So overall, it is still a bull market. A bit of caution. We will have to be determined by the results season that starts next week.
What about the auto pack? How have you read into the latest auto sales numbers? Is the strong across-the-board performance just a one-off and do you think the recovery looks sustainable?
Yes, definitely. There are two good things. One, prices have been hiked even by rural players. We have seen tractor makers hiking the prices from July 1. Maruti Suzuki, of course, has made three price hikes already so far this year. So the commodity costs are getting passed on to the consumer. Wholesale numbers are pretty good for June. In fact, from 2015 to 2019, we saw 2021 June shipments being very strong at about 2,45,000 for the passenger vehicle segment as against about 2,20,000-2,25,000, the average for the pre-pandemic four years.
Dealer checks are showing that inquiries are higher. But still, they are hoping that in July, they would see an offtake. However, across right from Maruti Suzuki till the last one or till the higher-end cars, we are seeing offtake. On the two-wheelers side, exports have become very costly. Bajaj is in fact highlighting that Latin American shipments are costing 5X of what they used to cost. Two-wheeler numbers were okay, not as bad as anticipated. A lot will now depend on the festival season as Ganesh Chaturthi comes in. As the festival season starts, we will have to see how the numbers take off but right now, positioning in the market is positive for both auto and auto ancillaries. We are expecting this sector to do well.
