3 hours Ago
Ajay Bagga , Market Expert, says the passenger vehicles segment is sluggish and overall, the autos are not priced at any discount. A very high premium is being given to Indian auto companies overall. So, it is not a time to buy.
Frankly, with an IPO, he prefers to wait and watch because of the kind of listing gain froth that comes in on the SME and the other segments. How are you dissecting moves within the auto pack because there too at least with the passenger vehicle segment, the slowdown is quite evident? Ajay Bagga: Frankly, I was expecting that with the harvest and the festival season, the two-wheeler pack should start outperforming, but the commentary really dampened that enthusiasm and everybody has now become more sobered up on the outlook for the auto pack. So, we will have a couple of missed quarters in terms of price action till the fundamentals catch up again.
Auto was an outperforming sector for most of this year, but now over the last few weeks it has started underperforming and that is based on sales slowing down. Passenger vehicles clearly there is a slowdown in the offtake and it translates back. The premium segments have limited capacity to keep absorbing and with the finance coming in, we have seen offtakes happening, but we have seen now languishing at these numbers and year-on-year growth is not very strong.
I was frankly expecting two-wheelers to come up in October, November. But the management guidance is not very good. So, we will postpone the look at autos for a couple of quarters and watch, until you see a serious consumption returning in the economy, it will become difficult for these auto stocks to justify A) their valuations, the exuberance around them and B) to really deliver the volume growth that is critical.
Margins have been under pressure, but at least if volumes were coming and now you can see the advertisements in the papers offering very hefty discounts and a lot of that inventory cleanup will happen because nobody will buy in December a car with this year's stamp on it. People will look at buying in January. So, this is the seasonal period where heavy discounting starts happening.
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A) for the people who have got it in the IPO, should they ride along or try to sell on Tuesday itself? Secondly, for the people who have not really got the allocation in the IPO and missed the party, should they buy afresh on Tuesday? Ajay Bagga: Passenger vehicles segment is sluggish and overall, the autos are not priced at any discount. So, we are giving a very high premium to Indian auto companies overall. So, it is not a time to buy.
Frankly, with an IPO, we normally wait and watch because of the kind of listing gain froth that comes in on the SME and the other segments. This was a very huge IPO. Nearly 100% allotments will come on the retail or the NII segments and anybody who applied should get the 2% subscription.
Two times was more because of the last minute pick-up by institutions. So, people will get a fair share of allotments. The grey market is not showing much excitement.
So, there will be disappointment on Tuesday. But overall, auto is struggling and we can give it a buy for now. Go for the financiers.
Those are well discovered and the financiers might do better, especially the private banks. You Might Also Like: Can Hyundai's entry cushion frothy D-Street attracting weak debutants? Go medium-to-long-term to make money from Hyundai IPO: Amnish Aggarwal (You can now subscribe to our ETMarkets WhatsApp channel ).
