"On tariffs, yes, you are right that that could be the case that just some nervousness because of tariffs, but if you just step back and look at the fundamentals of metal, it does look like metals are setting up for a nice move over the coming few years. We are on a cyclical low and valuations also are really not stretched on stocks and demand globally seems to be picking up," says Anshul Saigal, Founder, Saigal Capital.

Why is there so much of excitement in autos? The industry is not even growing at the GDP growth rate, forget about nominal GDP. You take out some exceptions like tractors and some companies like Mahindra & Mahindra, the sector, at least the PV sector is growing at 2-3%. What is the excitement all about in autos?
Anshul Saigal:

That is right, the sector is growing at 2% or 3%. Of course, we have to bear in mind that there has been a slight sort of beat on expectations in the fourth quarter in autos and prices have really not gone anywhere in the last say two-three years in fact. The largest passenger vehicle company has seen its stock price consolidate for the better part of the last three years and has gone nowhere while the markets we know have really gone gang busters in this period. Now, also, it is not just about volumes, it is also about profitability share.

What is changing is that the profitability share is moving up because the market in particularly PVs is moving from the regular cars to SUVs, etc, which is a higher margin product and as a result the markets are slightly enthused by that.

Also, in this year the expectation on commercial vehicles in terms of volumes has been rated up and the street expects that commercial vehicles will be between 5% and 10% volume growth which is something the market was not expecting earlier. So, combine these two things, it looks like there is some excitement also, stocks as I mentioned have come down, so there is some excitement in this sector but clearly this is a more a defensive sector than a huge sort of absolute return sector in our judgment.

So, wanted to get your sense in on how this entire piece of the metal tariff hike is going to play out because I mean, India is not a major exporter of steel and aluminium to the US in any case, so I guess in that sense, mathematically there is not going to be much of an impact other than of course Hindalco because of its US subsidiary Novelis, but sentimentally do you think metal stocks could take a hit today?
Anshul Saigal:

On tariffs, yes, you are right that that could be the case that just some nervousness because of tariffs, but if you just step back and look at the fundamentals of metal, it does look like metals are setting up for a nice move over the coming few years. We are on a cyclical low and valuations also are really not stretched on stocks and demand globally seems to be picking up. Now, if we are going to move particularly in the US to a capex cycle, where they add to capacities, add to infrastructure, demand for steel in particular and metals in general is going to be quite robust.

If China is to move out of its current morass, it has to really give a fillip to economic activity, again that will be positive for metals, steel in particular. And then, if we come to India and we see what has happened, the anti-dumping tariffs that have been applied in India, those bring Indian companies on the same pedestal as some of the importing companies into the country and that will again be positive for metal prices and also volumes in general.

All of this is setting up for a nice fundamental tailwind for this sector. Steel in particular looks interesting. Copper in general is the favourite of the markets because of the EV trade. So, in our judgment, this is an interesting sector to really look at and opportunities will come about in the coming few months and quarters.

The promoter selling, these block deals that have been happening, the rush of IPOs clearly seems to be getting back. Is that some sort of an alarm bell in the market of how the sentiment is out there?
Anshul Saigal: Again, my experience over the last many years says that selling of equity is much less of an indicator as compared to buying of equity because there can be multiple reasons to sell. For instance, in the case of Whirlpool, they are bringing down their equity because the parent is in trouble.

They have a lot of debt on the balance sheet of the parent and they need to sell. Now, that is not a reason for us to believe that there is something wrong with the India business, that is something that is happening at the parent level which is why equity is being brought down. But for all the reasons to sell, there can be only one reason to buy. If a promoter is buying, it is clear that he is buying because he sees value in his stock and he thinks that from here in the next few quarters and years, the stock is going to go up.

Hence, I pay much less attention to promoter sales. I pay more attention to promoter purchases. And also on IPOs, the IPO market going up. When markets in general do well, a lot of companies want to list and that trend is again picking up.

It was in a lull for the last six odd months, but it has come back again and I think that that is really par for the course. I would not read too much into it at the moment. But if the markets become heady and too much of IPO activity picks up, that is when you need to have certain flags in your head as to how much liquidity is being sucked out of the markets.