Should auto stocks be on radar? How to play defence stocks? Amnish Aggarwal explains

Time of India

4 days ago

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, Head, Research,, says defence stocks experienced a sharp rally post Operation Sindoor , but fundamentals may take time to catch up. Auto sector performance will be stock-specific, influenced by international deals and the India-US agreement. Domestically, Eicher Motors in two-wheelers and M&M in PVs are currently showing strength, with monsoon impact and the upcoming festival season being key factors to watch.We do not have any numbers on Jio Financial so far, but having said that, Jio Financials in particular is trying to grow big, as has been the case with some of the other ventures of the Reliance group. Now be it in asset management or segments of financial services, as of now, it is in a very nascent stage because they are handling very limited tangible business as of now. So, it is difficult to say with just one-year, two-year numbers. It will take time for the businesses to shape up. Yes, there could be some need for funding as they expand and that can be raised from the markets given the kind of brand equity the group has.In auto, one needs to be very stock specific because as far as the deal between the European Union, the UK, or the US is concerned, it is not going to impact the entire sector, that is one. Secondly, a lot will depend upon how the India-US deal goes through in terms of exports from many of the Indian companies. As far as the current deal we are going through, it might be beneficial for Tata Motors but not for others.But the mainstay of the Indian auto companies has been the domestic side where, in two- wheelers, it is Eicher Motors and in case of PVs, M&M is actually doing well. With monsoons being good, there could be some momentum there. It is very difficult to give any single point and very difficult to paint everything with the same brush. But having said that for the consumer or the consumption space, all those factors will play for auto whether it is interest rates, tax cuts, inflation and all that stuff which ideally should be positive for them.But having said that, the groundwork is there but one needs to see how in the coming festival season in particular the auto sales go. But if you go by the current numbers, M&M and Eicher are the two stocks which really continue to look good.Due to the benign crude prices, if you look at the oil marketing companies like HPCL, IOC, etc, over the past few months, these stocks have done well and numbers expectations are also built in. So, a lot here will depend on how the crude prices behave. Among oil exploration companies, we have been positive on Oil India in the past.But, if the oil prices remain benign, then in some of the refining and the marketing companies, the losses will not come from marketing and those counters can see some stability or an upside from here.Among the defence stocks, particularly after Operation Sindoor, for the next one, one-and-a-half months, there was a very sharp rally in many of these stocks and many of them gave 20-25% return from those levels. Sometimes these stocks go up but the fundamentals take time to catch up. Now, the order books are growing, the growth is there, but the numbers are not going to dramatically change from here. In the long term, these stocks continue to look good whereas in the near term, many of these stocks will move sideways to weak movements and that is a part of what happens naturally with many of the stocks.