What is your strategy on auto stocks?
I listened to the commentary of Rajiv Bajaj yesterday. Two things came out very clearly; one, on the export side, they have got the highest ever business volume and that is likely to remain strong. On the other hand, in the domestic markets, they played smart. In the 100-cc segment they lost about 30% of the volumes but scored in the 125-cc segment with 28% growth in this particular area.
So a swap is happening between a low margin 100-cc product and a higher margin 125-cc product. It is a very smart strategy. I would like to believe that even though they may have lost some share in the 100-cc category, they could make up with higher sales from a more profitable 125-cc category.
From that point of view, profit should be relatively better for the company both because of the exports as well as the high value-added products they could sell in the domestic market. If this trend has to continue in the coming months, wherein the consumer is buying more high value-added products vis-à-vis low end products, maybe because of the low cost of funds. In such a case, post the festive season too they should be seeing steady demand continuing, particularly because the rural area is thriving after a good monsoon and a better crops season.
Tata Motors earnings will be out today. Is there anything you are anticipating?
A couple of things. As far as JLR is concerned, the pain is done with. We also gathered the sense that the company has smartly positioned themselves into the passenger vehicle segment in the domestic market. One cannot be sure if it is profitable, but we would love to listen to its game plans.
In my viewpoint, the passenger vehicle portfolio of Tata Motors probably is a smarter portfolio than one could have imagined in the last so many years. How they position themselves in this particular segment needs to be heard from the company management. Fortunately, the commercial vehicle portfolio of the company along with the likes of Ashok Leyland and Eicher are finding themselves in a better territory comparatively.
In the commercial vehicles segment, it is likely to perform better. The scrappage policy would be a key decision driver. If the policy is favourable, then commercial vehicle companies like Tata Motors and Ashok Leyland should be doing reasonably well in the coming days.
Which is the one stock where you would be booking profit or selling?
Nothing is particular as far as the portfolio selling is concerned. However, in our PMS, we have been booking some profit. We have been booking profits in about 30% of the portfolio in the rally and should 12,000, 12,200 be tested, we will be booking some more profits.
It is more of a profit-booking strategy vis-à-vis an exit strategy. On the other hand, we are buying afresh into the portfolio. We continue to like HDFC where we feel that the fundamentals are shaping up well and if the corrective downside in the market offers an opportunity at lower levels, it could be a buy opportunity. We continue to like companies like Bajaj Auto. If the market gives corrective downside, it will be a buy opportunity for us.
Some of the pharma companies including Cipla offer buy opportunities at lower levels. We are waiting for two-three days till the expiry happens. Within that, if the market technically misbehaves and there are sharper falls, one could buy two-three companies and we have shortlisted these for our client’s portfolio.