3 factors that support EV growth in India; watch out for stocks in auto and OEM space: Anurag Jhanwar

In an interview with ETMarkets, Jhanwar said: “It is equally important to note that it is still in its early stages of development and the growth story will have its share of bumps too” Edited excerpts:

What is supporting the market’s bull run?

Overall macroeconomic factors provide comfort as we are seeing a fall in inflation, a pause in interest rate cycles, an increase in foreign investment in the equity markets led by issues being faced globally.

It all hints that the momentum is positive for the market; however, it is very difficult to say that we will see the growth coming in 2H2023 or probably in the next 12-18 months, it will come one way or after phases of consolidation it remains to be seen.

Which sectors are likely to hog the limelight in 2H2023?
General consensus is that interest rates increase is largely done for, and we might see softening in the same in the near term.

The timing of the same will be dependent upon various variables; however, when it starts happening it will lead to a revival of consumption activity, and hence housing finance, Automobile, capital goods, and FMCG sectors should see good demand.

Also, the infrastructure sector will see a fillip on account of Government spending.

How should one play the small & midcap theme in the second half of 2023?
The small and midcap theme has delivered superior returns over the long term on a rolling return basis; hence, from a long-term perspective, it makes sense to allocate capital to this sector.

In specific, it has been seen historically that reversal of high-interest rates leads to good momentum in both small and mid-cap space.

However, it is important that an investor is absolutely sure about the fundamentals and the quality of a business before taking a direct bet in this business.

Else, it is better to invest in this space via the Mutual Funds (MFs) or experienced fund managers route than directly picking stocks.

Also, it depends on factors like risk appetite, investment horizon, and financial goals. However, as a general rule of thumb, investors with a high-risk appetite and a long investment horizon may want to allocate a larger percentage of their portfolio to small and mid-cap stocks.

These stocks tend to be more volatile than large-cap stocks, but they also have the potential to generate higher returns.

EV space is getting hotter but is it a multibagger theme if someone has a 5-year horizon?
The sector is being driven by a number of factors, including

a)the government’s push toward electric vehicles,
b)the rising awareness about the environmental benefits of EVs, and
c)the falling cost of batteries.

All these will augur well the Indian EV market in the coming years.

The growth phase will open up multiple opportunities and hence one has to look at all the OEM and Auto space closely and find proxy opportunities at lucrative valuations to play the growth story.

It is equally important to note that it is still in its early stages of development and the growth story will have its share of bumps too.

What is your take on the recent HDFC – HDFC Bank merger? How will industry dynamics change? And will it benefit shareholders?
It is a matter of great pride to see an Indian Bank making its mark in the global arena, the merger pegs HDFC Bank as 4th largest bank in the world.

This definitely leads to a change of perception towards the Indian financial sector and opens up other Indian players to the idea and possibility of creating an impact at a global scale.

The larger conglomerate will benefit from a large balance sheet size and it will be a true financial powerhouse offering products and services appealing to a global audience.

As the benefits of a merger start playing out, it will lead to higher growth and profitability and hence reward shareholders in the medium to long term.

FIIs are slowly coming back to D-St. Will the inflows continue even though some central banks are raising rates?
India is currently looking like a bright spot amidst the slowdown in US, Europe, and China. Overall macro indicators are positive with inflation under control, the interest rate cycle taking a pause, tax collections, and productivity levels showing high.

This is giving confidence to the FIIs and it is expected that the inflows will be in the positive territory in the near term.

Record highs done! How should one look at asset allocation ahead of elections? Should one look at tweaking their asset allocation? Bonds, equities, gold – where to park your money?
Breaching the all-time high is a major psychological barrier from an investor sentiment perspective. Post which markets tend to be very positive about the overall scenario and a lot of bullishness builds in.

Moderating inflation, a pause in the interest rate cycle, followed maybe by a rate cut and a softening dollar should be taken as an opportunity to allocate capital towards equity and lock in higher interest rates bonds and less towards gold.

(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)