Daily Voice: Raghvendra Nath of Ladderup discusses why he favors investment in PV and two-wheelers over manufacturers of commercial vehicles

According to Nath, credit rating agencies anticipate high single-digit demand in the near future for the passenger car and two-wheeler categories.

Ladderup Wealth Management's MD is Raghvendra Nath

In the near run, given the rise in per capita income, urbanization, improved financing availability, and premiumization tendency, Raghvendra Nath, MD of Ladderup Wealth Management, favors the passenger car and two-wheeler sectors in the auto industry.

However, Nath states that a perceived lull in infrastructure development is the reason for the anticipated decrease in commercial vehicle traffic during the current elections.

According to Nath, who has over 29 years of business experience, the monsoon season and the lack of price increases would cause low demand in the cement market over the next months, which might make cement stockpiles unpredictable in the near term.

The following are edited quotes from a conversation with Moneycontrol:

What are your thoughts on Fed Chair Jerome Powell's most recent speech? Is he suggesting that November, rather than September, might see a reduction in interest rates?

Speaking at the Foreign Bankers' Association gathering in Amsterdam, Mr. Powell discussed his worries about inflation and how the Eurozone's supply-side issues have been outweighed by demand-side issues. He discussed the recent strong economic development seen by the US economy. The conversation leaves us with the impression that the Fed will likely stick to its current course in the next months and that maintaining rather than raising rates is more likely.

Powell said that the current policy is sufficiently stringent to allow the Federal Reserve to control inflation, but he did not specify when rate reductions from the Fed would be anticipated.

Powell seems to be concerned about the US unemployment rate and inflation.

According to predictions, the most recent CPI came in at 3.4 percent, a little less than the number from March. Mr. Powell is nonetheless concerned about inflation because it has been stickier and declining much more slowly than anticipated in the US.

At the conference in Amsterdam, Mr. Powell said that the labor markets are still robust and that the Fed was not concerned by April's somewhat slower but still significant job increases. As Powell previously said, the Fed may decide to lower rates sooner if there is a greater decline in inflation or a "unexpected" worsening of the labor market.

Do you think there's a chance the RBI may lower interest rates before this year's Federal Reserve meets?

When it comes to rate reduction, central banks throughout the world have generally followed the Fed, and we anticipate that the RBI will follow suit. The RBI has spoken about price stability in India, but the inflation statistics have not yet shown this. The RBI will likely maintain its position at the next meeting, although inflation in the upcoming months will assist it make a final decision.

Is this the appropriate moment to get involved in the cement and commodities industries?

Every commodity has a unique cycle, and investing is advised after the cycles have reached their lowest points. We don't personally had any experience with commodities. Commodity prices surged in the post-COVID period owing to a number of factors, including supply-chain problems and geopolitical concerns. But now that things have calmed down, most commodities are getting close to their stable values.

However, because of the ongoing crises in the Middle Eastern countries that produce oil, oil has remained unstable. Given the uncertainty of the geopolitical landscape, we anticipate further volatility in oil prices.

Poor demand over the next several months due to the monsoon season and the absence of price increases might keep cement inventories volatile in the near run. Although a short-term seasonal decline in demand is anticipated, a number of indicators point to a possible recovery later in the year. In the medium-to-long term, however, the government's emphasis on affordable housing and infrastructure development may intensify.

It's important to notice that during the last six months, most mutual funds have decreased their exposure to cement companies, which may be a sign of impending short-term pressure on the market.

Why do you think the two-wheeler and passenger car categories are better than the commercial vehicle segment in the auto industry?

Given the rise in per capita income, urbanization, easier access to finance, and the premiumization trend seen in the auto industry—as shown by the growing demand for SUVs—we favor the passenger car and two-wheeler categories in the near future. In the near future, credit rating agencies also anticipate high single-digit demand for passenger cars and the two-wheeler market.

There is a projected delay in infrastructure operations during the current elections, which is likely to cause a slowdown in the amount of commercial vehicles. Nonetheless, with the sustained emphasis on capital expenditures for infrastructure and the role played by the private sector in infrastructure, building, defense, and manufacturing, commercial vehicles will likely continue to be appealing in the long run.

When reviewing the profits for the March quarter, where do you want your money to go (in terms of sectors)?

The Q4 FY24 reports show a mixed bag of results, with positive business updates coming from the banking, real estate, and non-banking financial corporations (NBFCs) sectors. Having said that, the banking industry seems appealing at this time due to its strong performance. We will have to wait and watch how the banks do in the next quarters since the high interest rates are predicted to negatively impact their NIMs.