Synopsis

Indian consumer demand shows surprising strength, with auto sales exceeding expectations across both traditional and electric vehicles. Exports, particularly in two-wheelers, are a key growth driver. Fund manager Sachin Relekar sees opportunities in auto OEMs with strong product cycles, ancillaries diversifying into new sectors, and companies benefiting from the energy transition and AI buildout. He remains bullish on financials but cautious on IT.

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India's consumer discretionary demand is proving far more resilient than expected, says Sachin Relekar, Senior Equity Fund Manager at Axis Mutual Fund. Speaking to ET Now, he pointed to recent
auto sales data as a key signal of underlying economic strength, even as the first quarter was clouded by geopolitical tensions and rising fuel costs.

Relekar noted that both internal combustion engine (ICE) vehicles and EVs have shown strong resilience despite headwinds. Particularly notable is export performance in the two-wheeler segment, where companies are no longer relying solely on cyclical domestic demand but are successfully breaking into new geographies such as South America and Latin America. He expects this strength to extend into consumer retail financing companies as well.

Relekar splits his auto investment thesis into two buckets. Among original equipment manufacturers (OEMs), he favors companies riding strong product cycles and favorable geographic mixes, particularly those with powertrain-agnostic positioning that lets them capture growth in both ICE and EV segments. Within this, he highlighted SUVs as a still-expanding part of the passenger vehicle segment and scooters as a growing category within two-wheelers, with EVs outperforming within that space.

For auto ancillaries, Relekar is watching companies that can leverage their manufacturing expertise to diversify into adjacent sectors like consumer electronics, defence, or aviation — areas aligned with government policy focus and offering potential for valuation re-rating.

When asked specifically about export plays, Relekar pointed to two-wheelers as the clearest opportunity, citing growing revenue share, better margins from an improving product mix, and favorable currency tailwinds. Non-auto manufacturing opportunities within the ancillary space are also increasingly export-oriented, he added.

Beyond autos, Relekar flagged energy intensity and the broader energy transition, closely tied to AI infrastructure buildout, as a theme he expects to remain strong for a visible period, expressed through investments in industrial and capital goods companies focused on electrification.

He also holds positions across consumer internet themes, split between high-competition segments with suppressed near-term profitability but large opportunity size, and more established players in beauty, personal care, and apparel where profitability is proven but valuations are demanding. A third area of high conviction is manufacturing, spanning both the semiconductor value chain and the broader Make in India push.

Relekar remains positive on financial services, expecting improving macro conditions and easing geopolitical tensions to support domestic recovery. He specifically likes NBFCs, vehicle financiers, and large private sector banks, anticipating that consumer and commercial vehicle loan cycles will strengthen further as headwinds fade.

On IT services, however, he's more cautious. While valuations have corrected meaningfully and now trade below recent historical averages, uncertainty around the near- and medium-term impact of AI on the sector keeps his allocation meaningfully below benchmark.

Relekar flagged two areas of caution, though he isn't actively trimming exposure in either. First, while crude prices have fallen sharply, a resurgence in geopolitical conflict could reverse that trend quickly. Second, despite strong long-term conviction in AI-linked industrial names, recent price momentum raises the risk of short-term volatility in a segment where his portfolio concentration is already high.

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