Recently I heard Ramdeo Agrwal, Director & Co Founder of Motilal Oswal Financial Services, talking on top sectors and best stocks in those sector to buy now. He believes in value investing and opines that there are lot of investing opportunities.
Midcap banks and cement sector are the ones he thinks could make it very good providing value investors lot of opportunities.
He also thinks two wheeler market has huge opportunities with very few players tapping the entire two wheeler market. In fact there are only two market leaders in this industry, Bajaj Auto and Hero Honda. These 2 companies are clearly winners with no other big competitors in markets. 9 out of 10 bikes sold in India belong to either Bajaj Auto or Hero Honda.
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To counter the question on any growth left for Indian Bike makers, He gave example of sheer size potential in China — they do almost 35 million motorized-cum-electric bikes in China every year. India do about 9.5-10 million. So the potential to grow and the size of the market which can be for two-wheelers for our country, which has USD 1,100-1,200 per capita income, is very large. It also has to cater to the replacement market demand.
Everyone in India can not afford to buy a four wheeler. Although there are smaller cars being launched like Nano, the maintenance expenses and running costs are high for common man. With fuel prices going northwards all the time, it would be difficult for middle class to use four wheeler.
What we have to focus on is not the size of the opportunity. He thinks in India everything will grow. What is important is how many players are going to share that particular opportunity and in two-wheelers there are only two; we are just talking about Hero Honda and Bajaj Auto who are going to take about 80-85% of market share.
There is a reasonable race in the valuations and in India value doesn’t exist without growth. So one has to calibrate quality of growth at expected growth levels and see how exactly it plays out in the current valuation. So a growth stock could be a very good value in Indian context of value investing.
Source:CNBC-TV18 & Moneycontrol
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