Here's why Vinod Karki is bullish on the auto sector

economictimes.indiatimes.com:

«If you see the list, we have gone across market. I mean, you will find companies from large cap, midcap, small cap over there where such factors are exhibited by these companies,» says Vinod Karki, ICICI Securities.GARP, first walk us through how are these stocks screened and what is the rationale behind identifying this strategy? Yes, that is absolutely right and it is growth at reasonable price, basically, that is the acronym.

It is a global this thing and widely acknowledged as a strategy. So, basically, what we are trying to find here is companies which are showing sustainable growth but at the same time are at reasonable valuations because we have seen that sustainable high quality growth companies typically tend to trade at very high valuations and market seldom is giving out free lunches, so therefore, we have put in checks and balances to see whether these companies are indeed GARP but not value traps basically.

For that, we check whether they are undergoing any severe downgrades or the market is just ignoring their growth potential because it sees something else. So, all those checks and balances are there.

But broadly, it is trying to find those cohorts, those pockets where market is kind of maybe mispricing to some extent that the growth is good, sustainable, good quality ROE and things like that but the valuations are reasonable overall.Is there a market cap bias or these bunch of stocks are across market cap categories?If you see the list, we have gone across market. I mean, you will find companies from large cap, midcap, small cap over there where such factors are exhibited by these companies.