Aggressive scrappage policy need of the hour to address auto slowdown, says IndiaNivesh

The picture is bleak for the automobile sector and an aggressive scrappage policy is the need of the hour to address the demand slowdown, said Mayur Milak, senior research analyst at IndiaNivesh Securities, adding that he continues to be cautious on the whole segment.

Talking about the two-wheeler space, he said, “We did some channel checks with dealers in Uttar Pradesh, Madhya Pradesh, Gujarat, Rajasthan and we have heard some decent numbers, although the kind of numbers that people are anticipating in terms of 30-40 percent growth, we do not think that has happened.”

“However, even if they end up doing a flattish festive season at this point in time, it will definitely be positive,” he added.

On the commercial vehicle front, Milak said, “We are bullish on the entire recovery of the commercial vehicle (CV) cycle, in fact Ashok Leyland is one of our top picks at this point.”

“The government has done enough and they are now recognising that there is a need to do more and an aggressive scrappage policy is the need of the hour and if that happens then Ashok Leyland is just a pure CV player. Therefore, at about 11-12 one year forward PE, I would definitely bet my money on that,” he further mentioned.