Prefer TVS Motors and Eicher to Bajaj Auto; Trump tariffs a big sword over market: Dipan Mehta

Dipan Mehta, Director, Elixir Equities, says Trump's tariff increase on India creates uncertainty for exporters. Stock prices are stagnant due to underwhelming earnings. Among two-wheeler makers, TVS Motors and Eicher show surprising strength. Hero MotoCorp also posted good numbers as demand seems to be improving for two-wheelers. Bajaj Auto's results are decent but volatile due to export reliance.

The monetary policy has been almost a non-event and there has been a CPI rejig in terms of estimates that we have seen and all that had largely no impact on the market. What is your read through?
Dipan Mehta: Yes, it’s a bit of a non-event but that is perfectly fine. The RBI has been doing a great job in terms of expectation management when it comes to the currency or the interest rates. So, there are no concerns over there. What has spooked the market and what is hanging like a big sword is these Trump tariffs and although many analysts and many experts have said that the impact will be minimal, 0.3% of GDP by some estimates , but still a lot of investors fear that it is not as simple as that. It is quite a complicated development because it’s not just exports to the US but it also affects the competitiveness of India’s exports to the rest of the world and its own competitive position as well.

It is a kind of a flux situation for a lot of exporters because he speaks about increasing tariffs from these levels as well. So, we are in a situation of very vast uncertainty over here and that is impacting the stock prices. Also, the earning season has been pretty much okay. There have not been any great earnings which have really surprised on the positive side. By and large, there have been more disappointments and there is a certain element of stagnancy in earnings which is also resulting in stagnancy in stock prices.


Let us talk about some earnings. What is your first take on the Bajaj Auto numbers because largely it looks like a good quarter for Bajaj Auto?
Dipan Mehta: More or less, it is in line but the real surprising numbers in the two-wheeler came from TVS Motors and Eicher. Especially Eicher if you strip off the lower profits from the subsidiary which is engaged in commercial vehicles, the core two-wheeler business did very well. Even Hero MotoCorp also came with a good set of numbers. So, we are definitely seeing better demand, better trends for the two-wheeler industry after many quarters.

But I am more impressed with the results of TVS Motors and Eicher. Bajaj Auto, of course, had a decent set of in-line numbers, but there is an element of volatility in their earnings because of the large proportion of revenues coming from export markets. So, I would prefer other stocks over Bajaj Auto but nonetheless for the time being, given that there is upswing in the entire sector and the monsoon also will benefit all two-wheeler companies, I would remain invested, but from a fresh investment perspective, there are better alternatives.