The Automobile sector is generally regarded as a moderately cyclical sector. A lot of investors believed that companies like Eicher or Tata motors would see linear growth because of the generally underpenetrated auto market in India. However, as we can see this was untrue. The auto industry has gone through a cyclical downturn in the past couple of years and this was exacerbated due to Coronavirus.
I am not an automobile expert but in general, I have noticed that some of the best automobile brands are valued lower than any other consumer discretionary stocks in India. There are some problems with the sector like the oncoming EV phenomena and the NBFC crisis (most automobile purchases in India are through loans). But I think most good companies are tackling these either through partnerships with EV companies or by investing in their own R&D.
However, because I am not an automobile expert, I am not able to choose one name in this industry. I found this mutual fund that has a good bunch of companies and can be entered at the same price that it was available for before 2014 (and the upcycle in the auto industry). Here is the description from Moneycontrol:
"Sectoral/Thematic : Fund has 95.79% investment in Indian stocks of which 63.72% is in large-cap stocks, 19.16% is in mid-cap stocks, 12.91% in small-cap stocks.
Suitable For: Investors who have advanced knowledge of macro trends and prefer to take selective bets for higher returns compared to other Equity funds. At the same time, these investors should also be ready for the possibility of moderate to high losses in their investments even though the overall market is performing better."
This seems like a good time to enter into this sector and this mutual fund seems to be the best way for someone not familiar with the nooks and crannies of the industry to make use of the cyclicality.
Any thoughts would be appreciated.