Fortune Equity bets on Ashok Leyland, Bajaj Auto & Maruti

Mahantesh Sabarad, Sr Vice President - Institutional Equity Research, Fortune Equity Brokers in an interview to CNBC-TV18 gave reading and outlook for various stocks in the auto sector.

Ashok Leyland, Bajaj Auto and Maruti are his top picks from the auto space.

Also Read: Sanju Verma bets on ONGC despite crude and subsidy issues 

Below is the edited transcript of Sabarad interview with Latha Venkatesh and Sonia Shenoy of CNBC-TV18. Also watch the accompanying video.

Q: What did you make of the move in Hero Motocorp? Do you think the stock is highly over valued at this point?

A: Hero MotoCorp continues to surprise us, the stock has moved up contrary to valuation expectations. This has partly to do with Hero MotoCorp emerging as so called defensive stock for the market. The two-wheeler space has had continuous growth in volumes.

For the past 30 months Hero MotoCorp has been continuously growing, recording year over year similar month kind of growth. That is a long streak of growth and when you have such growth and good dividend yield promise, the stock tends to stretch in terms of valuation.

Q: What is your call on Maruti Suzuki? what do you think in terms of market share for them going forward?

A: The stock call currently is a hold, we have a price target which is Rs 1,198, so there is a small room for upside. Our view is that unless the current impasse seen on Manesar plant has a result it is very difficult for the stock to start rallying up once again.

As far as market share losses are concerned, it is only a matter of time for Maruti to regain lost market share. This is because it has got immense bookings from popularity of both the Dezire as well as hatchback Swift. We believe there is room for them to catch up on the market share front.

Once this strike issue is resolved, there is room for upside, so one can take a contrarian bet. We may not see between the downside risk to the upside risk we may not see the stock going down much but there is large room for upside.

Q: What would you top three picks be in auto space?

A: Currently our top picks would be Ashok Leyland, Bajaj Auto and then Maruti.