Buy Bajaj Auto, M&M and Hero Honda: Ajay Srivastava

Ajay Srivastava, Dimensions Consulting Pvt. Ltd, in an interview with ET Now talks about auto stocks.

What about the relative outperformance from the auto basket last week, the likes of M&M, Bajaj Auto as well as Maruti? How much would you read into it given the fact that fundamentally this sector is somewhat slowing down when it comes to car purchases at least?

All the three companies you name just now barring Maruti, they are in the two wheeler space. M&M is in a hybrid space and it is being valued by various people for various reasons. It has got a defence initiative. It has got aerospace initiative. It has got financial services, real estate, so I would not say M&M now is a pure auto stock. The true auto stock is Bajaj Auto, noticeable in all the counters except possibly M&M to some extent is the large cash surpluses lying with them and the zero debt. We all are looking at companies in the scenario that we are, which are positive on the cash balance, they are less borrowed or zero borrowing for most cases. Look at Hero Honda, almost zero borrowing. Look at Bajaj Auto, zero borrowing. The critical question is through this downturn, through this slowing also, these are the kind of people who can survive and keep growing their market share and getting into rural India, that’s the most important point. All these people have a story of rural India where government is pumping money, so when you say outperformance, they are not vitiated by the high interest rate. They are not vitiated by lack of lending issues. They are focussing in rural markets, expanding there, so there is some amount of relative buying in the space. People need to buy some stocks.