With new scrappage policies coming in, CV makers like , Ashok Leyland should benefit as well as the ancillaries and the tyre companies, says Chakri Lokapriya, CIO & MD, TCG AMC.
What are your expectations for the telecom sector? In January, Vodafone Idea has seen an uptick in subscribers and
has not done badly either.
Data tells us that Bharti Airtel has taken market share and people have been migrating to Airtel because of its superior network coverage. The company has some plans to broaden the scope of offerings to homes right from the cable services to landlines as well as its existing data businesses. So there is growth but it is a highly indebted company. I would not really buy into the stock at current levels but amongst the telecom companies, Airtel is better than Idea.
Where within auto ancillaries are you finding comfort?
The tyre companies are correcting — be it JK Tyres, Apollo Tyres and even more expensive stocks like
. These companies will do well because the demand for autos is still very strong and will recover further. There are elections in four big states within the next month or so. Economic activity will resume over there and the government orders will come out. Also a CV policy and scrappage policy is expected. Tata Motors, Ashok Leyland should benefit as well as the ancillaries and the tyre companies. Battery makers have not done that well, partly due to concerns over electric vehicles (EVs) and these battery companies are not well equipped. They will have to catch up and that space still looks attractive.
Why is it that we are falling on a regular basis and underperforming the global markets? If the concern is that emerging market money flow can be impacted by rising bond yields, then most of Asia should also be falling?
There is usually a cycle which repeats itself over and over again. I do not think this time around Indian underperformance will continue for much longer because Indian economy is recovering and bank credit growth is increasing. It is now 9% which is a good number. Yes, yields will go up just like equity markets grow ahead of earnings. Deep down in pandemic, markets were rising. Yields are moving up not just in the US but in India as well.
As banksâ excess SLR declines, that will push up yields a little bit closer to 6.5% and that is not a bad number at all because credit growth is superior. Until we readjust ourselves and see earnings coming in this quarter, it will set to rest a lot of the fears about earnings growth not being strong.
What is the outlook when it comes to the entire retail space? The sudden spike in Covid cases seems to have put a spanner in the works.
The sector will recover quite fast. One of the concerns has been the recent hike in Covid cases and just when it was expected to go down further. But I think the good news is that vaccination efforts have been accelerated and hopefully it will be brought under control. It also coincides with the point in time where employment is coming back.
Talking to some factories we can see they still have a worker shortage and people are coming back and more will come back after Holi. As that happens, the demand for retail will continue to go up and recover. The stocks are not particularly cheap. Every single one of them is expensive, reflecting the growth there. One has to be far more selective and maybe companies like Trent look far better than companies like an Aditya Birla Fashion, which has been splurging lots of cash in buying designer brands which is not its main marketplace customer base.