Revival in demand fueling Ashok Leyland stock: Ajay Bodke, Prabhudas Lilladher

In a chat with ET Now, Ajay Bodke, Prabhudas Lilladher, talks about the auto sector and specific names like Ashok Leyland and Tata Motors.

ET Now: Coming to Ashok Leyland, quarter after quarter they continue to surprise everyone. One side we have Tata Motors which has got the CV business, markets are not recognising that, on the other side we have Ashok Leyland, same business but it is one of those performing stocks.

Ajay Bodke: If you were to breakdown the auto sector, then one clearly sees continued anaemic growth in the two wheeler segment, which is of concern for investors. Whereas, the passenger car segment, the MCV and HCV segment, although, not so much the LCV segment, are clearly on a trot for the last six months and have been posting extremely strong numbers.

Our interaction with some of the capital goods companies and engineering companies gives us confidence that there seems to be a turnaround in a few pockets in the economy. In sectors like mining, sectors like logistics, and certain pockets in the case of construction, one is seeing a good amount of traction and hence you are seeing the underlying demand for MCVs and HCVs to continue to remain strong for months to come. That is creating buoyancy in stocks like Ashok Leyland.

In Tata Motors, unfortunately the JLR business is weighing heavily; the underperformance in the Chinese market is leading the company back. Otherwise, its Indian pie, especially the MCV and HCV business, is doing exceedingly well. Additionally, we are given to believe that the LCV business for most of the players is on the mend. Therefore, one will also have to keep a watch on the LCV part of some of these companies.