Auto: Auto at cusp of a rebound makes logistics a very good turnaround wager

Mumbai: Excessive-risk takers seeking to wager on a thematic home consumption story might make a lump sum allocation to transportation and logistics funds. Asset managers consider the present market presents a very good entry level because the auto sector is at a cyclical backside and is predicted to publish the very best earnings progress amongst friends because the cycle turns.

The Nifty Transportation & Logistics Index has outperformed key indices in eight out of the previous 11 years, and underperformed within the final three years, presenting a very good entry level.

UTI Transportation and Logistics Fund, the one actively managed fund within the house, is likely one of the best-performing fairness schemes up to now yr, gaining 11.2%, in contrast with the Nifty 50 which misplaced 3.4%. Eyeing the chance, new fund choices (NFOs) of

Transportation and Logistics Fund and Transportation and Logistics Fund have been launched. They may shut on the 18th and twentieth of October, respectively.

The auto sector has lagged behind the broader markets up to now 5 years with the S&P BSE Auto Index gaining 2.81% in contrast with the S&P BSE Sensex gaining 12.35%. Over the previous yr, the S&P BSE Auto Index is up 8.79% in contrast with the S&P BSE Senex which misplaced 4.72%.

Fund managers consider the present uptick within the auto sector is just the start of the rally.

“The auto sector is estimated to publish the very best earnings progress over the following two years amongst friends pushed by a robust demand-led cyclical restoration. The ensuing working leverage and decrease commodity costs ought to lead to margin enchancment thus offering visibility for robust earnings progress for the transportation and logistics sector,” mentioned Daylynn Pinto, fund supervisor, IDFC MF.

“Auto has a optimistic correlation to GDP progress. Because the economic system recovers, the sector ought to see increased pent-up demand and replacements. Additionally, sector-specific points like chip scarcity, emission norm modifications, insurance coverage value hikes and so on. are behind us and commodity costs too are easing,” mentioned Harish Bihani, senior fund supervisor, ICICI Prudential MF.

Monetary planners consider that in thematic funds the place there’s a sharp turnaround, traders might go for a lumpsum allocation at 5-10% of their portfolio. Apart from, being a thematic fund, portfolios of all schemes might have overlaps.

Buyers might go for UTI Transportation and Logistics, which has an 18-year observe document and look ahead to the IDFC and ICICI funds to construct a observe document, mentioned Rupesh Bhansali, head (distribution), GEPL Capital.