Strong Consumer Resilience Evidenced by Surge in Two-Wheeler Exports and EV Adoption, Says Sachin Relekar of Axis MF
India’s consumer discretionary market is demonstrating remarkable resilience, according to insights from Sachin Relekar, Senior Equity Fund Manager at Axis Mutual Fund. He highlighted recent auto sales data as a key indicator of economic robustness, noting that both internal combustion engine (ICE) vehicles and electric vehicles (EVs) have shown strong performance despite notable challenges such as geopolitical tensions and rising fuel costs. The auto sector’s export performance, particularly in two-wheelers, has been promising, reflecting companies’ success in expanding into emerging markets like South America and Latin America, which bodes well for the broader consumer retail financing landscape.
Relekar’s investment thesis categorizes opportunities within the auto industry into two distinct buckets. He emphasizes original equipment manufacturers (OEMs) that are benefitting from favorable product cycles and geographic diversification, particularly those with a powertrain-agnostic approach allowing participation in both ICE and EV markets. SUVs remain a robust segment within passenger vehicles, while scooters have gained traction in the two-wheeler space, with EVs leading the charge. Additionally, he points to auto ancillary firms that can diversify into consumer electronics and defense sectors, aligning with governmental policy and opening avenues for improved valuation.
Apart from the automotive sector, Relekar remains optimistic about energy transition themes, particularly as they relate to AI infrastructure development, indicating ongoing investment opportunities in industrial and capital goods focused on electrification. His strategy further encompasses consumer internet sectors, with a focus on both high-competition segments and established players in beauty, personal care, and apparel. Although he expresses bullish sentiment on financial services, especially non-banking financial companies (NBFCs) and large private banks due to an anticipated strengthening of consumer loan cycles, he adopts a cautious stance on information technology services amidst uncertainty regarding AI’s impact on sector performance.
While maintaining a constructive outlook, Relekar identifies potential risks that could affect market performance. The potential resurgence of geopolitical conflicts could rapidly increase crude oil prices, posing a risk to growth. Moreover, he observes that recent stock momentum within AI-linked industrial investments might lead to volatility, leading to a cautious positioning amidst high concentration in this segment of his portfolio. Overall, the insights reflect a nuanced understanding of current market dynamics, highlighting areas of opportunity while acknowledging potential risks ahead.
Source: The Economic Times
(Expert Note: This report was prepared by the Wealthova team.)