The case for earnings downgrades for auto companies is not yet built in yet and the sector might see positive surprises, according to Anish Tawakley, fund manager at ICICI Prudential AMC Ltd.
"Some of the auto positions we entered were when the price was cheaper," the deputy chief investment officer of equity told NDTV Profit in The Portfolio Manager show.
The fund will only exit the auto holdings when the earnings downgrades are more likely than upgrades. There is still a case of earnings upgrades for automobile companies, according to Tawakley.
He thinks that the earnings-downgrade case is not built in autos currently, underscoring that their thesis is more about domestic growth than about exports. "They may have done well in the past, but we might get more earnings upgrades."
Anish Tawakley (Source: NDTV Profit)
Anish Tawakley (Source: NDTV Profit)
Tawakley is more comfortable in the large-cap space than in the mid and small-cap space. "In large caps, while the valuations might be slightly on the richer side, they are not outrageously rich."
If earnings growth comes through and with the economy doing well, investors should benefit, according to Tawakley. "In large cap, I'm not worried about valuations, provided the economy delivers. The small and mid-cap are more challenging."
The fund manager is overweight on automobiles, industrial and capital goods, and cement segments. While the banking space is attractive with good demand, it is competitive.
Tawakley pointed out that the geopolitical tensions were the only risk involved in the current times. Globally, he said, economies are doing well with a booming US economy and relatively low unemployment levels in Europe.
Tawakley is not negative about China and expects it to recover soon. "China is going through a period of transition from real estate to other sectors.... that is a painful process and will happen in some time."
Watch The Conversation Here
Disclaimer: The views and opinions expressed by the investment advisers on NDTV Profit are of their own and not of NDTV Profit. NDTV Profit advises users to consult with their own financial or investment adviser before taking any investment decision.
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