MC Inside Edge: Inventory woes for the auto industry, eerie silence around budget, spike in Vijaya Diagnostics

Know what the stock veterans are eyeing.

Auto in the fast lane but what about the inventory

Most of the auto stocks have been in the fast lane for quite some time and given all the positive news flow around waiver of certain charges and incentives around hybrid and EVs, investors appear quite bullish on the segment. Maruti, for instance, is hovering around its 52-week highs while M&M touched its high last month. A section of analysts, however, believe that investors seem to be either forgetting or ignoring a key metric that is not good news for the sector – inventory. Some estimates show that inventory worth a whopping Rs 60,000 crore is staring the auto segment and the demand picture isn’t looking rosy either. Maybe, it’s time to press the brakes instead of the accelerator.

Budget’s coming? So what?

It would not be entirely wrong to say that the relevance of Union Budget has been dwindling over the years as many market-moving policy decisions are announced on the go throughout the year. But this year might take the crown, if market players are to be believed. The budget is less than two weeks away but there is an eerie silence in the markets. In markets, such calmness is not a sign of anxiety, it is of indifference. Most experts are keeping expectations to a minimum and while some say it could be a case of lessons learnt from the bloodbath on poll results day, others believe that given the subdued or rather lacklustre news flow around the budget, this year could be a year of no surprises. Fund managers, too, are being pretty nonchalant though they will be watching for any announcements regarding capital gains tax. 'No change, please’, is high on their wish list.

Unusual but bullish

Higher than usual volumes were seen in Vijaya Diagnostics on Tuesday.  Kotak Mutual Fund added to its positions by buying a block from a Middle East foreign portfolio investor.   The stock has climbed 75 percent since late September, but institutional investors—foreign and local-- have been cool to the story, going by the shareholding pattern over the past four quarters. One advantage that Vijaya has over peers in the diagnostic space is that radiology is less vulnerable to disruption, compared to pathology. That explains why the stock has been able to make new highs compared to Dr Lal Path Labs and Metropolis Healthcare, which are yet to regain their COVID peaks. Vijaya's shareholder base has been shrinking over the past couple of quarters, indicating that the stock may be moving into strong hands.