Russia-Ukraine war: Elara Capital prefers domestic players over globally exposed companies

A surge in crude spells a likely sharp revision in fuel retail prices while an extended shortage of chips due to the Russia-Ukraine war has been hurting auto stocks. Jay Kale, Senior Vice President Research at Elara Capital shared his views.

In the uncertain global scenario, he would hedge his bets on domestic stories more, Kale said.

Global ancillary companies will be under a little bit more pressure till things are sorted out whereas the unknown variables are lesser in domestic exposed ancillary companies and original equipment manufacturers (OEMs), so one would want to prefer to be in that space in this uncertain scenario, he explained.

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He likes domestic stories like Ashok Leyland, Maruti Suzuki India and Bajaj Auto which has exposure to the export side.

If there is any kind of signal of the Russia invasion of Ukraine getting sorted out, I think these global exposed ancillary companies will be the first one to outperform.

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The impact of geopolitical tension is felt in three key areas, one is on the margins, second is the demand momentum slowing down and third is the supply chain side of it, he said.

He believes higher fuel prices – because of rise in crude oil prices – will further dampen the demand sentiment in the auto sector.