Low valuations and better balance sheets make auto stocks a good pick: Pankaj Pandey

In a chat with ET Now, Pankaj Pandey, Head Research, ICICIdirect.com, shares his views on the auto sector, Excerpts:

ET Now: There is merit to revisit Mahindra & Mahindra because not only they have stopped losing market share in the SUV segment what has done the trick for them is the uptick in the tractor sales and for the quarter gone by M&M has reported a big uptick in their tractor sales?

Pankaj Pandey: If you look at tractors sales have been doing quite well for them and it is expected to continue to do well but now the concern would be on the SUV side which is where we would expect more launches to happen next year and you would have competitions there as well.

The entire auto space has hardly been any growth so combined two wheelers the growth is somewhat 3 per cent odd. In case the overall economy recovers the sector could witness a growth in the range of 8 per cent to 9 per cent odd and which will benefit most of the players including Mahindra & Mahindra.

This is one sector which one can look at sort of buying even at current levels because the valuations are not that expensive, these stocks are available at 14 times forward basis and with the kind of growth and operating leverage we would expect the sector to do well and this sector has got a better balance sheet so which is why even if somebody sort of holding it for election outcome also one can really look at. These are the stocks which one should be particularly sort of chasing given the kind of concerns which are there on some of the defensive names.