Automobiles: Two-Wheelers Lead the Charge
When asked about the consumption story in the auto sector, Upadhyaya highlighted the differences between two-wheelers and passenger vehicles.
“The volume growth in two wheelers seems to be a little more positive compared to four-wheelers. The festive season has panned out the way we expected. It has been a very strong festive season. Part of it was also because of the fact that there was a deferment from middle of August until about September 22nd and that also coincided with the festive season later on and hence, we have seen very strong volumes for both two wheelers and four wheelers,” he said.
While he noted a short-term slowdown, Upadhyaya emphasized that the wedding season could influence volumes in both segments. “Overall, from a two- to three-year perspective, we do believe that it is a good space to be in. But however, given the fact that there has been a sharp rally just around the GST announcement and thereafter, there could be some consolidation in some of the stocks. So, to that extent, one should not really chase the momentum.”
Capital Markets: Long-Term Growth Despite Sluggish Brokerage Trends
Turning to the capital markets, Upadhyaya noted that while penetration levels remain low, the sector offers significant long-term potential. “Clearly, capital market space is one where the penetration levels are very low in terms of how many customers actually are on some of these platforms, how many of them are actually trading or investing into capital markets. So, to that extent there is a very-very long runway for growth. However, again this segment has done exceedingly well in terms of the stock market performance as well over the previous several quarters. So, to that extent you need to be a little cautious in terms of selecting stocks at right valuations. However, from a longer-term perspective, the opportunity is very large. One can definitely bet on capital market intermediaries in that sense,” he said. Tactical Plays: Metals on the Rise
When pressed on short-term tactical plays, Upadhyaya highlighted global commodities, particularly metals.
“Generally, we do not tend to have too many tactical allocations in our portfolios. However, from a very short-term perspective clearly there seems to be some momentum in global commodities especially metals and we do believe that if some of the Chinese capacities go out of market, then the strength that we have seen in pricing can continue for some more time. So, tactically one may look at adding some of those metal names,” he noted.
Banking: Consolidation and Future Earnings Growth
Upadhyaya also shared his outlook for the banking sector following Q2 earnings.
“Clearly, we were a little surprised to see net interest margins kind of holding up for the sector as a whole despite the fact that we have seen repo rate cuts successively over the last few quarters. Going forward we are not expecting too many interest rate cuts. So, to that extent the pressure on net interest margins should not be too high and at the same time we do expect credit growth to inch up slightly to higher levels. So overall, we do believe that in financial year 27 for example this is one segment which will grow much higher than the average market earnings growth and the sector has also consolidated quite nicely over the last couple of years. So overall, this is going to be a sector to really bet on if you are looking at financial year 27,” he said.