Is the resurgence in the auto sector across categories and not just in CVs but also two-wheeler majors, passenger vehicles, tyres as well as battery makers?
We have enough triggers in terms of the kind of performances that some of the tyre companies have reported. The kind of outlook we are looking at in terms of volume growth and the margin picture definitely bodes well for companies like Ceat and Apollo and maybe some other tyre companies also.
At the same time we are seeing that the green tax by itself may not have a material impact for some of the names like Ashok Leyland or some of the CV companies. But if a scrappage policy comes through, then it can revive the interest for companies like Ashok Leyland and Tata Motors because this has been a big trigger that the market was looking at and overall in terms of growth monthly numbers continue to show good traction. So there are enough catalysts for auto companies and we like Eicher, Tata Motors, Ceat from an investment perspective.
It looks like the scrappage policy is nowhere close to what everybody expected. Also, there is going to be a green tax and you can run your own vehicle by paying some additional tax. That may not induce a new cycle for the auto industry. Could there be a disappointment because auto stocks buzzed the last 8-10 days on the buzz of a scrappage policy coming?
It looks like a very small version of the final scrappage policy which may be out anytime soon but this by itself will not have any big impact either positive or negative because though the smaller operators will have to pay extra tax, at the same time for the bigger auto manufacturers, that would not move the needle much. So I am not worried too much about this.
The monthly numbers and the positivity in management commentary for companies which have announced results give confidence that the overall growth is continuing. Earlier we were all talking about the pent up demand and how post December this may not sustain but I think we are in a much better territory when it comes to growth and that should make one confident about investing in auto stocks.