“Automobile sector to witness revival in the Festive season” : A.K. Prabhakar, Head, Research. IDBI Capital.
The Finance Ministry last weekend announced several measures to aid the ailing economy by reviving consumer sentiments. But how the economy will respond to these measures? When the recovery process will start? These are some of the questions BiznextIndia analyst T.Moharana asked to Mr A.K. Prabhakar, Head, Research. IDBI Capital. Excerpts of the conversation.
Biznextindia : How severe is the current economic slowdown?
A.K.Prabhakar : These kinds of slowdowns we have been witnessing at regular intervals. Now the interest rates have been cut and the government has pumped in Rs.70,000 crore in the banking system. However, GST reduction in two-wheelers will do the magic. The major issues they have removed, but there are few minor issues. If they remove them, nothing more will be required.
The government has taken several measures recently to revive the economy. How do you see the effects of these measures on the economy?
A.K.Prabhakar: Look, these are not the stimulus measures and because of this nothing will improve drastically, normally after a slowdown the economy has always picked up, without any support. But liquidity easing, what the government is doing which include measures like infusing Rs.70,000 Cr in the system and interest rate cut. With these measures, I think in the next 6 months we can see the revival.
BiznextIndia: During this time of slowdown, what is your advice to the common investors? Which are the stocks they should rely upon and which are the stocks to avoid?
A.K.Prabhakar: We always tell people to buy quality stocks. Sectors like Paints (Asian Paints, Burger Paints ), Life insurance ( HDFC Life, ICICI Prudential Life, SBI Life, HDFC AMC) etc. So, the be with the stocks or sectors which are performing or the growth rate is above 15%. For example, Demat is growing at 30%, so that is the stock we need to invest for a long time. Even though Hindustan Lever is growing at 8% and they are pretty consistent, even in the slowing down market, they have not seen any negative growth. So my advice is, be with the company that is growing or making healthy profits.
BiznextIndia: The Automobile industry is witnessing a downturn. How do you see the effects of the Government measures on the sector?
A.K.Prabhakar: The government has removed several misconceptions like including the operational period of BS-IV vehicles, Ban of Diesel/Petrol Vehicles etc. from the minds of the consumers. This will help revive the demand and we can see revival in the Automobile market in the upcoming festive season.
BiznextIndia: How do see the performance of Automobile stocks in this backdrop?
A.K.Prabhakar: At this point in time I prefer Maruti and HeroMotocorp as they have been the market leaders in their respective segments. I feel recovery will be lead by the market leaders. So Maruti and Hero will be the best stocks to perform.