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Upbeat on two-wheeler space, Maruti a buy on dips: Nischal Maheshwari, Centrum Broking

Most of the auto companies are talking about high single digit to double digit de-growth for FY20.

ET Now|
Oct 18, 2019, 10.57 AM IST
Nishchal Maheshwari-1200
Markets are trying to factor in that the government is going to do everything possible to revive the economy and the sentiment seems to be on an up move, says Nischal Maheshwari, CEO, Centrum Broking. Excerpts from an interview with ETNOW.

What is your view on the earnings numbers that have come out and how have the markets reacted to the Brexit news? How are markets trying to factor in?
There has been some respite as far as the market is concerned. Markets are trying to factor in that the government is going to do everything possible to revive the economy. That will take some time but the sentiment seems to be on an up move.

SBI had a strong move yesterday, Some positive commentary is starting to come in on the banking major, ahead of the earnings announcement. What is your view on the PSU giant?
Most PSU banks should be avoided except for a few like Bank of Baroda and SBI. We have a buy on SBI.

At these levels, what would you buy among the private banks?
We are looking at corporate banks as well as the retail banks. Among corporate banks, we like all three -- SBI, Axis and ICICI, not necessarily in that order. We are also looking at IndusInd Bank, given that the stock has corrected and this quarter’s numbers are also good. Most of the corporate banks seem to be in a good position at the moment.

What did you make of TVS numbers?
Yes TVS numbers were good,better than the expected. Margins were also higher. Volumes were a bit disappointing but they have said in their conference call that volumes will pick up because some of the states where they are big, were flooded during the last quarter and that is why they have lost some volume/ They are quite hopeful that come Diwali, the numbers once again will be good for them. Overall, two-wheelers seem to be in a good space to start nibbling at. Our top pick in two-wheelers remains Bajaj Auto.

Overall on the auto pack, do you think valuations are factoring in discount? You mentioned Bajaj Auto. Yesterday, there was a big brokerage upgrade on Eicher as well. What are these auto companies factoring in?
Most of the auto companies are talking about high single digit to double digit de-growth for FY20 and flat to 5% kind of growth in FY21. Most of the analysts from the Street are factoring in those numbers as far as volumes are concerned. Bajaj seems to be in a better position because almost 40% of their numbers comes from exports and we believe that Bajaj will do a plus 5% kind of volume growth in FY21.

I am pretty hopeful that given that there has been a good monsoon, the rural sales numbers should also start coming up. So, I remain pretty hopeful on two- wheeler space. Even Maruti should be bought on corrections. But at the moment, you can avoid CVs, that is my broad take on the whole auto pack.

Earlier, one would focus on any private bank which is growing at 20% plus with a decent asset quality. Do you think within the private bank also there will be niches,select few banks which investors would want to buy at any price?
Only the top two or three banks -- HDFC Bank and Kotak Mahindra Bank are the two banks which people are looking to buy at any price. Everything else will now become calibrated. In the largecap banks, there is Kotak and HDFC at the top and then the corporate banks like ICICI. Axis comes in between and then there is the third category of retail banks like RBL, IndusInd and all. Then there are banks with huge asset concerns, like YES Bank. PSUs like SBI and all should come into the second category of corporate banks. This is the way I would look at the whole banking space especially on the private side.

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