The recovery in auto sector will not be very fast or as resilient as we saw last time, says Daljeet Singh Kohli, CIO, Stockaxis.com in this interview. Edited excerpts:
The market is now showing renewed optimism on PSU stocks. Would you venture out to invest in any of these names if you had missed the previous rally?
I would not want to invest on a very short-term and momentary basis. It is based purely on hopes and flow of news. If there is something fundamentally strong and has a lot of value in it, then we will take a call.
In that sense, BPCL fits the bill because it has that value. They have exploration, gas and refinery business. If it is available on the lower side due to some adverse news flow, then we will use that opportunity to enter.
BHEL is another example where a lot of speculation is going on. You can say that BHEL has a lot of value, but that value is only when its business itself will perform. The business has not performed for the last 12-13 years. We do not know who will be the new buyer and what will it do with BHEL. For BPCL, we know the buyer will get retail outlets and an entry into a closed industry with only 3-4 players. In BHEL’s case, thermal power is on the backseat as renewables are coming up. So the business is on the downhill. We look at it on a stock specific basis.
Do you think the recovery in auto sales is going to be as smooth as was the case in 2020?
I do not think the recovery will be very fast or as resilient as we saw last time. There are two reasons for that. The first is that this time the wave is much more sharper, wider and spread across geographically. So the impact is even in rural areas, Tier-I and Tier-II cities. The second aspect is that this time the wave has impacted household savings. As many people have already spent money on health issues, they are not in the right mental set up to spend on high-ticket purchases.
The personal mobility factor has already played out in the first wave. Those who wanted to buy a motorcycle have already done that. Those who haven’t bought yet might be going through a rough patch in personal life. There are less chances of this being on their priority list. Therefore, we are not very gung-ho on auto stocks.
We are waiting for a recovery in commercial vehicles. There was some recovery from November till February, but in the last two months CVs have again taken a backseat. Half of the dealerships are closed. I think it will take a long time to revive. So it is better to stay out of auto.