I am sure you are pretty gung-ho with the kind of AMFI data that we have on a month on month basis. The net inflows have come in this time around and clearly they have been a bit impacted by the outflow from the liquid funds. What are your overall thoughts on the kind of equity AUM that we have seen and the NFOs that have added considerably to the total inflow?
That gives me confidence. While domestic investors may choose to book profits from particular segments of the market like largecaps or hybrids, I think they are basically reacting to the fact that the India economy overall is fairly insulated from the world. Decoupled is a very strong word. The export-oriented sectors like IT and pharma obviously will be affected in recession but overall, look at the situation; the malls are full, one has to wait for years for vehicles to be delivered, the festival season was good.
I do not think the retail consumer as such is feeling any downturn heat yet. I know the MSME segments are facing some challenges but overall, the mutual fund flows are reflective of the fact that people are bullish on India and they are willing to commit risk capital to the stock market. That is the underlying message I see from this.
Yes, there will be months where they will book profits because there is so much noise around valuations and they would want to take some money off the table. To a small extent, rise in FD rates means that some people are getting a real return on bank FDs.
If you do not take tax into account, minus inflation, you are getting inflation heading around 5-6% and they are getting 7.5-8, so 1% or 2% of real rate return. They are probably shifting a little bit tactically to that space. But other than that, I do not see any sense of panic among domestic investors and that to me is a good sign going forward because whatever FII related volatility there may be the bottom of the market, there is a good protection because mutual funds are getting flows.
A lot of the worries and issues are behind us when it comes to the auto space with respect to the semiconductor concerns and the kind of commentary that Tata Motors has given. Which car are you eyeing?
I just bought MG Z5 EV. Although it is not complete environment friendly, at least it is not adding to the pollution. So I just bought an EV. I am quite happy with the way it has been functioning.
The second aspect from the auto perspective is that the one segment of auto which will be a little bit under pressure will be the components because that is an export-oriented sector. If the world goes into a recession, we will be a bit wary about the auto component sector.
But that apart, the commercial vehicle space is going through a cyclical recovery thanks to the transportation and logistics demand arising from a capex boom. So that is one sector we are very bullish on because the demand for freight-related movement of trucks, heavy vehicles is going to definitely go up.
The second aspect is the pent-up demand in the car space. Today the customer wants differentiation and the auto expo is going to throw up a new variety of models with different features and that will create excitement because people think of that as a reason to change cars.
Otherwise, in India, refrigerators, people tend to keep air conditioners, cars for a decade or more. We do not turn or churn around our vehicles as much but this whole positioning of newer variants and all of that will cause a churn which is good for the auto sector in terms of improving the overall demand.
The third aspect is vis-a-vis the commodity producers, which broadly have come off the highs of the previous year. It is good for their margins and auto companies with the steel and other auto related inputs and crude related input costs being at an easier trend is definitely going to help.
Overall, the way I see it is that the oil prices are holding up now because it is winter in the advanced countries. Post March-April, with the slowdown coming, we will definitely see oil prices trending down and from a retail consumer perspective, if the government passes on the oil price decrease, that also will be a boost for vehicles. Green vehicles are there but there is a long way to go before green vehicles get a significant market share because they tend to lose out on power a bit and long distance there are still not enough charging points across the country.
