Nomura remains underweight on auto space

Remain underweight on autos, says Prabhat Awasthi of Nomura Financial Advisory & Sec.

Awasthi told CNBC-TV18, "We have been underweight autos but within autos we have been more bullish on rural plays because the governments focus on rural the fact that there has been a huge agri inflation, which has improved the terms of trade for agri economy dramatically over the last four years every year. We believe that there is fair amount of labour shortage in that area. So mechanization play such as Mahindra, while we have been underweight on autos Mahindra was one of our picks for this year and is a top pick because we think that volume growth continue to be positive and we will continue to surprise. We are also looking at companies in autos, which have more pricing power with respect to other so less competition and more consolidated industries."

He further added, "If you were to pitch tractors versus two wheelers versus cars then you can earlier see that the maximum pricing power is probably in tractors because it is the most consolidated industry followed by two wheelers and followed by cars, so that is how we have two stocks in our model portfolio, which is Bajaj and Mahindra and we do not have the rest."

"Commercial vehicles per se are facing some amount of slow down as you can see from the monthly numbers that have come through and it is clearly a manifestation of the slow down that we brought a slow down in the industrial growth we have seen in the recent past."

"Banks I am still circumspect. The inflation problem continues. We have very strong historical evidence which suggest that banks do not perform when inflation is rising and we have had a food inflation issue which is plateau out. The global inflation will continue to hang on India