Nifty: Be cautious, we are not out of the woods even with Nifty above 17K: Andrew Holland

“The numbers reflect a lot of different things at the moment but they are okay. Margins have been under pressure, but the way forward for the auto sector is to see if inflation eases and the Fed continues to hike rates,” says Andrew Holland, CEO, Avendus Capital.

We are seeing the beginning of another move which is probably at an all-time high. Will you be a little cautious if Nifty crosses 17,000?
It’s been a good run. The market retraced all the losses we saw in June and there is talk of the Federal Reserve going a little more on Wednesday. There is an optimistic view that we are going through the worst of the problems. The Federal Reserve raised rates during the summer. There is a technical recession in America. That’s when we haven’t really seen the impact of interest rates.

Normally it takes three to six months to start nurturing the economy and we haven’t really seen the problems of shortfall in the balance sheet, which will increase in case of shortfall in September.

I am still concerned about the unintended consequences of the rate hike and the liquidity crunch. As the US economy has seen a two-quarters technical downturn, the underlying economy is clearly very vulnerable.

Before those rate hikes, the market has been a bit complacent in that regard and so the rally may continue a bit more. The dollar is weakening and all of these Goldilocks scenarios will be thrown around as a reason for the market to climb higher. We are not out of the woods yet. For now, I am cautious.

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With a good monsoon this year, we are expecting an impact on the tractor sales to come. What are you dealing with when it comes to auto majors and auto sales numbers?
Numbers denote many different things at the moment but they are okay. Margins have been under pressure, but the way forward for the auto sector is that inflation will ease and Fed rate hikes will be halted. If this is the case, then the prices of commodities that have seen a reasonable increase will continue to decline. This is a tailwind for the auto sector going forward and that’s why we like this sector. It’s had a fair sort of pickup, but as you get through that and more investors move not just on the core business but also in EVs, it’s going to be significant.

I went to Mahindra store the other day. I took a look at the seven seater and I asked what the price was. Before he could tell me the price, he said there was a two-year waiting list. Clearly there is a very strong demand for this sector and if they deliver all those cars in the next two years and the input costs come down, the margins for Mahindra are going to be very good.

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