ETMarkets Smart Talk: Ashutosh Tiwari explains why he is positive on auto & realty for next 2-3 years

Further, correction in crude and stabilization of the Rupee is important for markets to make a new high.

Where do you see the rupee headed in the near future? Any data points that investors should track?
The dollar index has remained fairly stable over the last 3 weeks and the same is reflected in the Rupee as well.

We believe that global inflation is a critical data point to track as bond yields will depend on that as well as currency movement.

Shareholding data seems to suggest that FIIs might be selling but raising stake in some of the midcap companies. Although the broader market underperformed benchmark indices in the recent past, do you think it is time to increase weight in small & midcaps?
One should look selectively in opportunities in the small & midcap space where growth outlook is good, cash flow generation history is strong, and valuations are reasonable.

We believe that easy liquidity days are gone and therefore one should invest in companies with strong fundamentals trading at reasonable trailing multiples than where the thesis is based on future earnings while historical performance was weak.

What are your views on auto and realty? Both these sectors rose in double digits so far in July?
For the next 2-3 years both the sectors are looking good. Auto are coming out of 3 years of downturn and therefore we see cyclical recovery, fall is commodity prices are also positive for the margins which compressed over last 6-7 quarters.

Reality is coming out of a long down cycle of and started recovering from late 2020, we believe that affordability has increased post 8-10 years of downturn. The sector will also benefit from fall in steel and other commodity prices.

What is your take on June quarter earnings which have come so far? Do you see earnings taking a hit in the rest of FY23?
Margins have taken a hit during the quarter as the full impact of run up in commodities post Russia-Ukraine came through, however as commodity prices have softened since then, margins should start improving from 2Q or 3QFY23.

Demand might remain soft in the near term due to inflation and recovery expected from the festival period. IT growth might moderate due to recession fears in Europe/US, some companies have already started talking about it, we expect more earnings to be cut in IT.

We are getting some Rs15000 cr every month in SIPs. This is an encouraging sign which also signifies that retail investors are now more confident and informed. Retail investors have replaced FIIs to become the backbone of D-St. How do you see this pan out in near future?
SIP flows are expected to remain robust as retail investors have made money and are finding equities as a better asset class than other options like gold, FDs etc.

Where is smart money seem to be moving in the rest of 2022?
We expect manufacturing to do well and hence related sectors will see better money flow, also sectors benefiting from commodity deflation will be better off.

Based on this theme, we expect Autos, industrials, cement, real estate and building material to do well

Finally, what is your mantra of picking winners for a portfolio? Is there any specific parameters you see before making a buying or a selling decision?
Historical cash flows and trailing trading multiples are important starting points when looking at new investment opportunities.

Post which one should look at growth opportunities in the sector and how the company is placed to capitalize on the same.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)