Recovery In Auto Volumes Expected Only in Second Half Of 2021: Motilal Oswal Report

Broking firm, Motilal Oswal in its latest handbook titled, "Bulls and Bears", has said that the recovery in auto volumes can be expected only by Sept 2021.

"Considering the discretionary nature of autos, recovery of stocks would be a function of improving demand visibility from the impact of BS6/COVID-19. We expect volume recovery only from Sep'21 for 2 wheelers /passenger vehicles, while commercial vehicles would be even more back ended," the handbook has said.

According to the report the auto sector is trading at price to earnings of 31.8 times on weak FY21E earnings due to the impact of Coronavirus.

"With uncertainty in demand due to the effects of COVID-19 along with an impact on the financial health of companies, stock prices are factoring in the potential cut in earnings estimates for FY21E," the Bulls and Bears Handbook has noted.

Private Banks: Business environment remains challenging due to COVID-19 outbreak

The brokerage firm handbook also noted that the business environment for private banks will be challenging.

"Private Banks trade at a price to book of 2.3 times, below their historical average of 2.5 times. Over the past few years, muted corporate lending has resulted in systemic loan growth being largely driven by the retail segment. However, the outbreak of COVID-19 would lead to weakening of credit demand in Consumer Retail, MFI and SME/Business banking segments. We, thus, expect loan growth of Private Banks to moderate to 13% (v/s 18 earlier projected) in FY21E," the firm has noted.

Indian equities: Market cap-to-GDP ratio at its lowest since FY06

Meanwhile, India's marketcap to GDP ratio is at its lowest since FY 2006. "Market cap-to-GDP ratio has seen a steep decline - from 79% as on FY19 to 54% (FY20E GDP) - much below its long-term average of 75% and closer to the levels last seen during FY05 and FY09. The Nifty is trading at 12-month forward RoE of 11.6%, below its long-term average of 14.1%," the report noted.