Bullish on auto sector: N Subramaniam

In a chat with ET Now, N Subramaniam, Head Institutional Equity, Karvy Stock Broking, share his views on auto stocks.

What is your sense to some of these tyre companies? Obviously the duty on raw rubber has actually not been push down to 7%. It's still at about 20% but nonetheless all these tyre stocks have been going through the roof?

In fact any of the tyre companies or any auto ancillary units has a direct correlation to the auto sector on the whole. Now that is an admitted fact and we are being seeing auto companies doing extremely well. I think with whether the finance like auto finance rates coming down and with new launches and festival season coming in and Maruti already posting close to a lack of units in this month.

I think, when we are looking at auto companies doing well there is no reasons for either a tyre company or a battery Exide Batteries or auto ancillaries not doing. So I think this has a direct correlation with auto companies and it is bound to do well.

You did talk about auto ancillaries but what about pure auto companies because the kind of trends that is emerging with the monthly sales data year on year yes yet again or rather time and again I should say auto companies continue to post highest ever sales but it is on the month on month basis that the sale seem to be either dipping or are flat?

No, see auto companies, auto sales have nothing to do with probably the festival season. It is more cyclical in the sense during festival season during the new lunches. I think these matters a lot on auto sales in particular but this time it is quite unusual.

Normally during monsoon the auto sales are always at its low end. In fact, we always see there is a substantial drop in the auto sales but this time surprisingly the auto sales have been pretty good, pretty decent compared to the past and I have absolutely no qualms or no suspicion about the performance of these auto companies going forward. So my bullishness on auto sector continues. What a thing is that valuations are pretty high because all those sectors and stocks have moved up substantially and any correction in the auto sector should be definitely looked into.