D-Street Voice: Accumulate auto component manufacturers for 4-5 years investment period: Piyush Nagda of Prabhudas Lilladher

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Piyush Nagda, Head, Investment Products, Prabhudas Lilladher is of the view that PLI scheme in auto-sector favouring EVs and advance automotive technologies will make India more competitive and help in attracting more fresh investments. Auto component manufacturers with modern R&D can benefit a lot. Nagda, who has more than 20 years of experience in the financial service industry, has worked with Motilal Oswal, JM Financial and Axis Securities in senior management roles driving pan-India businesses across investment products.

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In an interview to Zeebiz’s Kshitij Anand, Nagda advises investors to look at accumulating stocks in the auto component sector with minimum 4-5 year horizon as this space is still evolving. Edited excerpts:

Q) We have seen a fast and furious rally in September as we move closer towards 18000 on the Nifty, and about 59000 on the Sensex. What are your views on markets?

A) The market rise has been spectacular as the Nifty50 saw its fastest 1000-point rally while hitting a new high. There could be bouts of volatility and intermittent sharp corrections, but we expect this rally to sustain on the back of improved earnings growth, low cost of capital and foreign flows. There could be some cooling-off in the short-term, but our long-term view remains positive.

Q) Telecom sector has been in the limelight in the week gone by. What is your view on the sector, impact of the PLI scheme and what should investors do?

A) Recent relief in the form of 4-year moratorium on statutory dues, rationalisation in definition of AGR and spectrum user charges etc. as announced by the Government has given a much-needed breather to the sector, especially Vodafone which was staring at bankruptcy. We are seeing a marginal improvement in ARPUs on the back of high data usage which needs to sustain to help the already ailing sector and prevent it from becoming a duopoly. Investments in 5G networks are expected to be significantly high leading to higher and longer capex cycle. PLI schemes will benefit telecom equipment manufactures in a run-up to 5G implementation. Investors can scan equipment manufacturing segment to find suitable opportunities.

Q) Most of the global markets have done well in 2021 — where do you see India with respect to global peers? Is Indian market getting overheated or is there still value that could attract global investors?

A) Global equity indices hit all-time highs in August and India was the best performing market among global markets. Regulatory crackdowns in China have provided another fillip to Indian markets. India was the biggest recipient of foreign money in the region outside of China for the year to date. Being one of the fastest growing economies globally and 3rd largest economy in Asia, Indian markets will keep attracting global investors. Valuations are stretched but select pockets still offer good opportunity. The likely inclusion of India in Global Bond Indices in early 2022 will further consolidate India’s position as a stable economy among emerging markets.

Q) PLI scheme in the auto sector is likely to favour companies that are EV focused. Is it a good time to accumulate auto companies and are there any stocks that are likely to benefit the most?

A) Globally, the automobile industry is shifting towards EVs and alternative fuels due to emission norms and rising consumer awareness and adoption. PLI scheme in auto-sector favouring EVs and advance automotive technologies will make India more competitive and help in attracting more fresh investments. Auto component manufacturers with modern R&D can benefit a lot. Investors can look at accumulating them with minimum 4–5-year horizon as this space is still evolving.

Q) What should be the ideal portfolio strategy – at a time when there are new age IPOs entering stock markets or stay with popular blue-chip stocks.

A) Ideally portfolio strategy should be largely driven by strategic asset allocation. Investors with high-risk appetite can look at a tactical strategy to benefit from the current market trends. Today’s new age companies could be tomorrow’s blue-chip stocks but might test your patience. Investing in new age IPOs or popular blue-chip stocks should solely depend on one’s risk profile and investment objective.

Q) Which sector could turn out to be a dark horse in FY22?

A) Textile and Auto-ancillary will benefit from China+1 policy. Real estate/Home improvement segment can see a structural boom.

Q) What is your investment philosophy? Has your holding in cash increased amid the recent run up to be deployed later?

A) I stick to my asset allocation strategy with 70% allocation to equity. Within equity I have 15% allocation to International Equity which will increase to 25% gradually.  Yes, the cash pile has slightly increased recently with intent of deploying it in some tactical ideas.

Q) What is your call on small & midcaps? Do you see a rotation trade happening from broader markets to LargeCaps?

A) Several mid and small caps are now trading at valuations higher than large caps and risk reward seems tilted in favour of large caps as of now. High valuations shift trade towards large cap on valuation concerns.

(Disclaimer: The views/suggestions/advices expressed here in this article is solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)