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    Is it time to book profits in auto stocks or are these long-term bets? Chakri Lokapriya answers

    Synopsis

    “In terms of the capital gains, the market is not expecting anything and in other words, it will clearly be a very big negative if they tinker with either short term and long term capital gains tax, or change the holding periods because equity is risk capital whereas fixed income by definition generates a fixed income and there is no upside or downside relatively speaking.”

    Chakri-Lokpriya2-1200ETMarkets.com
    “I do not think it is time to book profits in two-wheelers and they have also underperformed the expectation on this. The valuations are on their side. I think it is best to hold on to the stocks,” says Chakri Lokapriya, CIO & MD, TCG AMC.

    Gland Pharma board has communicated to the exchanges that the company is not aware of any plans to sell shares by its promoters. In your understanding, when there is communication like this should we read in between lines?
    There are two levels here; one, if it is a founder’s stake that is technically feasible and I guess partly the wording is fairly careful over there but if you look at the bigger picture, from a fundamental picture, for a company trading at about 12-13 times and 9-10 times ROE, at 6 times EBITDA, the exit timing seems to be rather at low multiples given the business stake. So it is more difficult to comment on it but these are two possibilities; one, it is at a low valuation and second is founders are technically allowed to sell.

    A couple of days more and the monthly sales data for November will come out and auto stocks will again be in focus. Some of the brokerages are talking about how some of the stocks have become very inflated – be it M&M or Eicher. Is it time to book profits in some of the auto names or do they continue to be good long-term bets?
    The two-wheelers are expected to report fairly good sales whether it is Hero Motors or TVS Motor and even Eicher. The commercial vehicle segment is supposed to report fairly good sales also. The recent trend is loan growth trends towards these areas seem to be fairly strong. While year-on-year sales growth looks strong, it is still below pre pandemic levels. I do not think it is time to book profits in two-wheelers and they have also underperformed the expectation on this. The valuations are on their side. I think it is best to hold on to the stocks.

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    Is Paytm part of your portfolio allocation?
    Fortunately, I did not buy into Paytm. The stock has come off quite a lot. Is it a good time to buy? I would still stay by the sidelines because the pain is not yet over for Nasdaq as a sector, for the product companies and the consumer tech companies. Yesterday, for instance, the US Black Friday sales were very strong which means interest rate hikes will be stronger than expected and that is again negative for product tech stocks.

    Given all this, we will still stay away from Paytm.

    The buzz on capital gains tax has started a bit early. Normally it starts in January. This time it looks like the government is in a mood to give an indication in November itself. Are markets expecting something on dividend, capital tax gain or LTCG?
    In terms of the capital gains, the market is not expecting anything and in other words, it will clearly be a very big negative if they tinker with either short term and long term capital gains tax, or change the holding periods because equity is risk capital whereas fixed income by definition generates a fixed income and there is no upside or downside relatively speaking. Against this structure, the market in fragile condition coming out of Covid, hopes that there will be no tinkering with the equity capital gains.



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    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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