Auto to do well in next 2-3 years: Sachin Shah

We believe that because some activity is now picking up on the industrial side, some of the logistics players will also benefit, says Sachin Shah, Fund Manager, Emkay Investment Managers. What are you researching in the last couple of weeks?We are looking at the overall rebound in the economy. From that perspective, one place where we are seeing a lot of buoyancy is on the hiring side. It started with IT as a service. From there, it has spread across businesses. For most of the business leaders, the bent has been towards hiring and lowering attrition rate. India Inc is on a hiring spree. We have certain domestic outsourcing companies for the hiring side and we are more focussed on that. We also believe that because some activity is now picking up on the industrial side, some of the logistics players will also benefit. Ecommerce has always been a good thing but the industrial movement has not been so good in the last two-three years particularly the calendar year 2018 and 2019. But in the last couple of quarters, we are already seeing some green shoots over there. There is something really interesting in logistics plays at this point in time. One of the most avoided underperforming areas of the market is the auto sector. Do you see a case to build position on a select basis over there?We strongly believe that auto as a sector will actually do much better and within autos, the auto ancillary will do well as these are not only servicing the domestic market but they are actually a glocal plays. Basically, the world is their market and almost 30-40% of the revenues come from the exports markets. They have a decent presence in the domestic market. The domestic market is underpenetrated in terms of personal mobility. The rising per capita income will create more demand. So, that is a secular story that we are going to see with some cyclical blips. Auto as a sector is definitely going to do very well from the next 24 to 36 months’ perspective. In case of banking and financial services, we are seeing a very smart recovery based on overall economic activity. Banking is the backbone of the economy and I believe we are going to see much better credit asset qualities and better credit growth. When interest rates are lower, banking as a service tends to benefit on the spread side also.

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