A,E,I,O,U Kings 4 U

According to PM Telang, Managing Director, Tata Motors, FY10 is going to be definitely better than FY09. However he added that while this is indeed optimism, it should be looked at as cautious optimism.

Even the two wheeler segment is upbeat. Pawan Munjal, Managing Director, Hero Honda, said, things were looking up and most sectors in the automotive industry had started doing well. “We are definitely going to do better than the previous fiscal. That is what we have planned for and that is what we are going to do. We are very much on target to do that. While the overall environment has not been very conducive, in spite of that we fixed ourselves targets which were to do more than the previous fiscal."

Monsoon, a worry?

However, Jyoti Vaswani, Assistant Director-Fund Management, Aviva Life is cautious on the auto sector. "The discomfort from auto arises from two factors. The growth last year has largely been driven by the rural segment. Given that monsoons are deficient, one needs to see how the growth pans out in this segment. Autos are also interest-rate sensitives. So, one has to watch out, given that there are inflationary expectations and that government borrowing is on the higher side, which may rise further because of the deficient monsoons. Also, interest rates are said to harden. Given this background, we remain cautious on the auto segment."

But companies do not see this as a cause of concern in the near term. S Sandhilya, Chairman of the Eicher Group, believes, “We don’t know what kind of growth we can anticipate. My belief is that we are reaching the bottom and there should be hopes for the positive movement—no matter what happens to the monsoon little bit here and there some adjustments but there will be growth over the next two to three years. The major growth can be expected without a doubt.”

Hero Honda’s Sales and Marketing Vice-President, Anil Dua feels, “In the short-term we are not really seeing any impact on Hero Honda sales at least. But in the medium- to long-term, if monsoons become a bigger issue than they are today then I think for industry it will be a matter of some concern.”

RC Bhargava, Executive Chairman, Maruti Suzuki believes that monsoons have had no impact on the company. “So far the reports seem to indicate that the monsoon will not have any significant impact on our sales. The purchasers of our cars are not farmers in the sense that they are just pure farmers. A lot of them are business people, merchants, professionals etc. I don’t think they are that much affected by the monsoon."

Good things to come

And companies are doing their share to gear up for the festive season.

Telang said, “We would do much better once the new model is out in the market. Indica Vista is already in the market and the sedan on the same platform should be in the market also coming soon.”

Hyundai too on the other hand plans to launch the new Santro on September 1 this year.

Hero Honda’s Dua said the company plans to launch nine new models this fiscal. Though no work has been started yet, the company is optimistic that by the end of March 2010, all the nine planned models will be out. “We have eight months in hand. You will start seeing launches starting with the festive season and through Q3 and Q4. You will see all nine launches,” Munjal added.

So is it a good time to buy auto stocks?

While Vaswani is clear on her cautious approach on auto, Pashupathi Advani of Advani OTC Dealers believes that the space is okay. “People seem to be buying cars again and we have got the festive season and the numbers have been good so as the buying of financing cars I think cars will continue to be bought and the roads will continue to be blocked. I heard earlier about Hero Honda they also have got some exciting things in line for us so hopefully that will be good too.”

Ambareesh Baliga of Karvy Stock Broking offers a middle-ground. He says that investors could wait for the stocks to correct further in September-October to buy. "Looking at the way the monsoons have panned out, I suppose October-November-December could have some issues for these auto numbers."

Rahul Mohindar of viratechindia.com sees buying emerge in auto stocks at lower levels.