The year 2019 should see normalization for the auto sector as a whole, said Rajat Rajgarhia of Motilal Oswal Securities.
Rajat Rajgarhia, Managing Director-Institutional Equities, Motilal Oswal Securities is of the view that Nifty level is no longer a relevant indicator because it does not reflect anything in the last six to 12 months.
"Nifty may remain within the range of 200-300 points but we can see few weeks of strong rally continue for broader markets, which will bring in a positive sentiment," said Rajgarhia in an interview with CNBC-TV18.
If this optimism were to continue, it has to reflect in the midcap and smallcap space more than the largecaps, he added.
When asked if it was a good time to buy into oil marketing companies (OMCs) now, he said: "The stocks are likely to stay range-bound and it would take a long time before the old valuations come back. It is unlikely that they would react strongly even if crude fell down by $10-15 from here. Most investors have deserted these stocks after holding them for three to four years and most would look to exit them on rally than buy on decline. Other PSU names look attractive than these OMCs, said Rajgarhia.
Moreover, PSU allocation in the portfolio of investors is not on the rise." he added.
Furthermore he added, "With regards to autos, they are a reflection of both the cyclical and structural slowdown in the system. Things might not get worse for the sector but it could be a long time before things recover. However, it has been a highly profitable sector for last five to seven years, and 2019 should see normalisation for this sector as a whole."
He expects growth numbers for the sector to be muted even though the absolute numbers will start bottoming out. He doesn't see volume numbers lower than what they are trending right now.
Talking about the housing finance companies (HFCs), he said, "18 months back there was nothing wrong this sector could have done. However, this is a space that will remain exciting and longer time outlook remains very positive," he said. Players that survive this liquidity crisis will just have to remodel their business growth rates, focus on liability franchise and the growth outlook.Source: CNBC-TV18