Sentiment in auto space changed positively: BP Singh

In a chat with ET Now, BP Singh, Executive Director & CIO-Equities, Pramerica Mutual Fund, shares his view on auto space. Excerpts:

ET Now: If I look at the market behaviour, the stand out feature for the month of August has been the entire consumer discretionary space be it autos or consumer durable stocks. There is no evidence that demand is back on track yet both consumer durables and auto stocks are sitting at multiyear high, what explains the underlying momentum in them?

BP Singh: The auto stocks need to be separated from the other segments. As far as the auto is concerned, it brought two news in August.

First, the monsoon got revived in the entire economy and as a result of which the rural income is stabilised and the demand might come from that expectation. If you go around and meet the companies, particularly the dealers, you will notice that there is a revival of demand and the companies are sitting on very low inventory in the pipeline.

They started pushing inventory in the system and suddenly the sales numbers have started to appear good coupled with that. If you see the auto ancillaries they are benefiting a lot because of the demand which is coming from the global economies particularly from United States where the auto sector is doing extremely well.

So, when you combined these two factors together you notice that the sentiment for this particular sector have changed positively and that explains why these companies are making a fresh high.