Automobile demand in June has remained skewed in favour of passenger vehicles (PVs) and tractors, said Motilal Oswal Financial Services (MOFSL) in a report.
According to the report, commercial vehicles (CVs) and two-wheelers' (2Ws) sales are yet to catch up.
"June '21 saw a gradual lifting of lockdown restrictions across states, with a good recovery witnessed in PVs and tractors."
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"Current valuations largely factor in a sustained recovery (our base case), leaving a limited margin of safety for any negative surprise."
According to MOFSL: "We prefer 4Ws over 2Ws, as PVs are the least impacted segment currently and offer a stable competitive environment."
"We expect the CV cycle to recover and gain momentum towards 2HFY22. We prefer companies with a higher visibility in terms of a demand recovery, a strong competitive positioning, margin drivers, and balance sheet strength."
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Besides, MOFSL pointed out that 2Ws, CVs, and tractors were above our muted expectations, while PVs were in line.
"Based on weak feedback for 2W or M&HCV retails, there seems to be a further inventory build-up in 2Ws."