Regardless as the commodities are cooling down, in the auto space, Anil Rego, founder and fund manager at Right Horizons, believes OEMs (original equipment manufacturers) with a strong product pipeline and premium product mix are likely to outperform.
The demand for commercial vehicles (CV) is likely to continue to be healthy, and the demand momentum in passenger vehicles (PV) and utility vehicles (UV) is expected to continue, while car demand may slow down and a revival in two-wheelers (2W) demand may be gradual, he says in an interview to Moneycontrol.
After the recent IT earnings, the seasoned investor for over three decades says consensus downgrade by largecap IT companies that have released results, so far, points to the expectation that the growth is likely to be flat or marginal for H2 of FY24. Excerpts from the interview:
Will the equity markets be surprised if the Federal Reserve announces a pause in interest rate hikes in the next policy meeting?
Considering the recent surge in long-term treasury yield, Dallas Fed president Lorie Logan said, "If long-term interest rates remain elevated because of higher term premiums, there may be less need to raise the Fed funds rate." If the term premiums rise for the same Fed funds rate, all else equal it could in effect partially cool the economy leaving less requirement for additional monetary tightening.
The Fed in its last meeting signalled a likely hike before the end of the year. To the Indian equity markets, a rate hike or a pause by the Fed, will not be a material driver for the markets as the significance is lower at this point since markets are pricing in rate cuts next year both in the US and domestically.
Also read: Why Sebi’s new regulation to report investor demise is 'gamechanging'
Do you think the India-UK FTA deal will go through this time? What do you expect out of it?
As per India’s commerce secretary, the India-UK FTA (Free Trade Agreement) will likely be concluded by the end of 2023. The India-UK trade deal negotiations are at the stages where key differences are being ironed out. India’s contribution to global exports is in the low single digits.
The country has been actively pursuing to sign FTAs with larger economies and this will be India’s most complex FTA to date. The outlook for exports in the long term looks bright as the government takes steps to boost exports and make India a global manufacturing hub.
Do you expect festive season to be strong for the auto space?
The demand for CVs (commercial vehicles) is likely to continue to be healthy and in PVs (passenger vehicle), UV (utility vehicle) demand momentum is expected to continue while car demand may slow down and revival in 2Ws (2-wheeler) demand may be gradual.
Also read: Hero MotoCorp arm Hero FinCorp picks 8 i-banks for mega IPO of around Rs 4,000 crore
Volume growth in Q2 is likely to be lower YoY as the festive season starts later. The underperformance of the auto sector in the past few months is due to concerns over inflation. Regardless as the commodities are cooling down, we believe OEMs (original equipment manufacturers) with a strong product pipeline and premium product mix are likely to outperform.
Your take on the tyre space...
Tyre companies’ revenue is expected to grow in mid-single digits with margins expanding due to operating leverage and lower raw material cost. Demand momentum for truck, bus and radial tyres was positive but muted for replacement. We have a neutral view of the sector.
Do you think the best may be over for net interest margin of financials, but not for growth?
Loan growth is expected to remain healthy, driven by traction in the retail and SME segments and as the corporate segment recovers. Growth in personal loans and real estate is also expected to be robust.
Also read: ASK Automotive, ESAF Small Finance Bank, Cello World get Sebi approval for IPO launch
As deposit mobilisation picks up, the rising funding costs and stagnant loan yields will put pressure on margins. However, the net interest income will be aided by healthy loan growth.
Your take on the IT major earnings and HDFC Bank numbers...
The downward revision in revenue guidance by Infosys for the second time in the fiscal despite a decent first half and bagging a large deal that was the highest in its history shows weakness in key verticals and geographies. The company also indicated that two large projects have come to an end with no large-scale deals to replace. Consensus downgrading by the largecap IT companies that have released results so far points to the expectation that the growth is likely to be flat or marginal for H2 of FY24.
Also read: Why are analysts still bullish on HDFC Bank despite a mixed Q2 show?
HDFC Bank's credit and deposits growth was healthy and the decline in NIM was anticipated due to the merger, incremental CRR (cash reserve ratio, and additional liquidity. The bank reported higher-than-expected Q2FY24 PAT driven by higher other income and lower tax rates. Margins are expected to recover gradually with normalization of credit growth and NIM is expected in FY25 as FY24 numbers will be impacted by the merger.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
Find the best of Al News in one place, specially curated for you every weekend.
Stay on top of the latest tech trends and biggest startup news.
