Market momentum: Here’s why Ajay Bagga is bullish on two-wheeler stocks

“There is some weakening globally, but India is doing very well in macroeconomic terms. The balance sheets are very clean for companies. Banks have the capacity to lend,” he says Ajay BaggaMarket Expert.

What do you think of the market momentum? Is there no way to stop it?
Ajay Bagga: Yes, the flows are very strong and we see that internal flows They are absorbent. Even with the small FII sales that are still happening, we are seeing that absorption happening. So the internal flows, I would say, are the first factor and then if you add them, the global signals are quite benign now. We are in a strong rate cut cycle. The Swiss Central Bank also cut rates today. So, globally, we are seeing the arrival of monetary stimulus to economies.

There is some weakening globally, but India is doing very well in macro economies. The companies’ balance sheets are very clean. Banks have the ability to lend.

Therefore, we are in a good position in macroeconomic terms, in terms of the strength of corporate earnings and in terms of cleaning up the banks’ balance sheets. And on top of that, internal flows are arriving. So we are comparable in terms of flows to the United States of the 1980s, when Ronald Reagan introduced 401,000 accounts, or to China of the early 2000s, which is the kind of scheme that India is seeing right now and that is giving a lot of strength to this market rebound.
So what is the market demand right now? Anything you’re buying, recommending, or something that looks interesting that you’re keeping on your radar for when the market goes down?
Ajay Bagga: Yes, I think the two big trends globally are also coming to India. One is that artificial intelligence is becoming ubiquitous in everything. In second place are renewable energies. So anything around this, anything you can find in India, will work well, that’s the global touch point. And internally, I think the story of next year is the recovery in the rural demandThat is manifesting itself very strongly. We know the capital expenditure. We know the construction of public infrastructure and its impact. You’re seeing 20% ​​better taxes year over year. All those benefits of building infrastructure are manifesting. Railroad and defense stocks have already risen and have also seen a slight correction. Now what is changing is rural demand. So anything related to the rural economy, this is a good time to address it. Today I was surprised by the movements of passenger vehicles. Frankly, I wasn’t expecting that and we’ll have to wait and see because there is a huge inventory of high-end cars at dealerships. Nearly Rs 70,000 crore is automobile inventory. That’s part of the holiday season, too. Companies tend to overproduce so that distributors have enough stock.

But we will have to wait and see how the numbers come out. But he two wheeled vehicles They are doing very well and that is linked to the rural economy. I am more optimistic about two-wheeled vehicles than photovoltaic ones.

But since the Karnataka government has emerged, if other state governments become competitive, the UP government already has a policy. Maharashtra has a policy in place, they have to expand it. So, if big states start giving these types of incentives to passenger vehicle manufacturers, then we will see the passenger vehicle segment also do well. Otherwise, I am betting more on two-wheelers due to the return of rural demand.

Whatever channel we’ve heard, read, or anecdotally pointed to a bit of softness this holiday season?
Ajay Bagga: There is softness. The figures for July and August do not look very good. But what’s happening, if you look at the top-down view, you look at the trade deficit, as it reached $29 billion, and the biggest boost to that trade deficit came from gold imports.

So, we are on the cusp of 35 lakh weddings in November and December. You will see retailers and jewelers doing very well. Therefore, I am not very worried about the figures that will be obtained in July-August. I think as the festive season gains momentum, next week when Navaratri begins and then the wedding season takes off at the end of October, we will see retailers, high-end retail as well as jewelers, do well .

They have been stocking up on a lot of inventory in advance. Stocks have also risen. But as we saw today with the foreign brokerage talking about a national retail company, there is still room for further re-rating and that consumption and those segments, the rich and upper segments, are very strong, perhaps the wealthy masses have not caught up . And also there, as rural demand increases, we will see how those come out ahead.

But the rich and premium segments are doing very well and you will see that correlation with the wedding season, whether for retailers or for jewelers.

In the power sector, because this new power plan has us excited about the upcoming Rs 9 crore capex. Do you think this is already priced in or are you expecting more fireworks for energy stocks?
Ajay Bagga: It is largely discounted. Every 10 days we get this REC number of 2030, it will be X lakh crores and renewable energy will be so high. So it’s largely already included in the price. But energy, once again, fits with artificial intelligence, data centers, the increase in energy demand and also with the renewable energy story.

Therefore, shovel and pick suppliers, as well as financiers, will tend to do well, but it is a well-known story. And just one more point I would like to add, as I mentioned earlier, I was surprised by the increase in the number of passenger vehicles due to the increase in inventory.

If we look from the top down, diesel consumption in India has decreased by 2.5% year-on-year. SUVs are getting huge discounts. They are not selling, MUVs are selling more.

So, smaller cars, gasoline or hybrid, of course, receive subsidies and sell, but diesel cars find it difficult. So I’m not really sure passenger vehicles. Perhaps connected two-wheelers and rural cars will fare much better.