Why ICICI Prudential Mutual Fund Is Betting On Auto Sector — BQ Edge

Weak credit creation due to balance sheet issues of financing partners, Covid-19 related demand shocks, chip shortage, regulatory changes such as the transition to stricter emission norms and higher pricier on account of a surge in commodity costs hurt affordability, Prakash Gaurav Goel, senior fund manager at ICICI Pru AMC, said.

That caused the auto sector to “stay weak” in the last few years. Even in 2021, the Nifty Auto underperformed the Nifty 50 by almost 600 basis points, he told BloombergQuint’s Niraj Shah during a session at a BQ Edge event.

But buoyant hiring, including in IT, salary hikes and a possibility of discretionary spend growing non-linearly post the $2,000-per-capita income mark would augur well for the auto sector, Goel said. The positive wealth effect of equities, too, will aid purchases, he said.

Goel has turned constructive on auto ancillaries, and existing two-wheeler and passenger vehicle makers.