Auto sector doing well despite hitches: Dipan Mehta

In a chat with ET Now, Dipan Mehta, Member BSE and NSE, shares his views on the outlook of the auto sector.

The kind of auto sales numbers particularly that have come out today have been fairly encouraging particularly for the likes of Maruti and TVS Motors. Do you see the growth potential persisting?

Yes. Despite the rise in interest rates over the past few months, the auto sales have continued to rise pretty well and despite higher base effect the demand continues to be quite robust. It is more to do with rising income levels in the rural as well as the urban areas. At the same time, the trend is likely to continue as well going forward given that again we are seeing inflation coming into play. Lot of consumers who are looking at postponing purchases are now getting into the act as soon as possible. We are hearing of price increases coming in from the entire auto industry, which may act as a bit of a catalyst to get the auto sales going. So, by and large, the industry is absolutely facing blue sky scenario at this point of time and there may be some issues on operating profit margin front because of higher raw material cost. But at these kind of volume growth, they should be able to manage their operating profit margins. Do keep in mind that operating leverages will come into play for these companies as well and as of now, it is more of a challenge to get the production going to meet the demand rather than the problems that may occur on the demand side.