Axis Mutual Fund's Strategy in Adding Battered Auto Stocks to Its Portfolio
Axis Mutual Fund's recent decision to add battered stocks in the auto sector to its portfolio reflects a strategic move aimed at tapping into potential value unlocking opportunities within a highly underperforming industry.
Current State of the Auto Sector
Over the past 2-3 years, the auto sector has been one of the most disadvantaged in the market. All-Share Indexes in the auto sector have plummeted by 50-70%, while the auto index has experienced a significant decline of 14% over the past year.
Stocks Added by Axis Mutual Fund
Awarding due credit to the sector's resilience, Axis Mutual Fund has strategically chosen to invest in companies like Maruti Suzuki, Eicher Motors, and Mothersumi Systems. Though these companies have experienced a decline from their all-time highs, the potential for value unlocking and growth remains undiminished.
Reasons for the Investment Strategy
The rationale behind this investment strategy is multi-faceted:
Value Unlocking
There is a substantial potential for value unlocking in the auto sector as CapEx (Capital Expenditure) picks up and financial stability improves. Market sentiment is expected to improve, leading to a surge in auto sales, possibly reaching the levels seen in 2017. This resurgence offers a promising upside potential of at least 50% from the current market price for these stocks.
Quality Investment Amidst Adversity
The investment in fundamentally strong stocks is a prudent move. Companies like Maruti Suzuki (in cars), Eicher Motors (in bikes), and Mothersumi Systems (in auto ancillaries) are recognized for their excellent quality and performance, making them ideal choices for value-investors.
Conclusion
This strategic approach by Axis Mutual Fund underscores the importance of identifying and investing in stocks that, despite current challenges, have a potential for significant growth. As the market trends stabilize and the economic environment improves, these stocks are likely to recover and reach their 52-week highs, offering investors a lucrative opportunity for returns.
For more insights and updates on the auto sector and related investments, stay tuned for our latest news and analysis.