Indian auto sales are exceeding expectations, showcasing consumer resilience. Fund manager Sachin Relekar highlights growth opportunities in both traditional and electric vehicles.
New Delhi, India Jul 3, 2026 ALN: 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 strength, even as the first quarter was clouded by geopolitical tensions and rising fuel costs. This resilience in the auto sector can be seen as a reflection of broader consumer confidence and spending behavior, which is crucial for the overall health of the country.
Relekar noted that both internal combustion engine (ICE) vehicles and electric vehicles (EVs) have shown strong resilience despite headwinds. This is particularly significant given the increasing costs of raw materials and the ongoing global supply chain disruptions that have affected numerous industries. The auto sector's ability to maintain sales momentum suggests that consumers are willing to invest in automobiles, which are often considered big-ticket items. This could be indicative of a recovering economy where consumers feel more secure in their financial situations.
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. This diversification of markets not only helps mitigate risks associated with domestic fluctuations but also opens up new revenue streams for manufacturers. Relekar expects this strength to extend into consumer retail financing companies as well, suggesting a broader positive trend in consumer financing and credit availability.
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. This strategy highlights the importance of flexibility and adaptability in a rapidly evolving market, where consumer preferences are shifting towards more sustainable options. 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. The rise of electric scooters, in particular, has been notable, as they offer an environmentally friendly alternative for urban commuting, aligning with global trends towards sustainability.
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. This diversification is crucial as it allows companies to spread their risks and tap into new growth areas, especially in a landscape where traditional automotive sales may face challenges from shifts in consumer behavior and regulatory changes.
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. The two-wheeler market in India has been exceptionally strong, with manufacturers increasingly focusing on quality and innovation to meet international standards. Non-auto manufacturing opportunities within the ancillary space are also increasingly export-oriented, he added, reflecting a broader trend of Indian manufacturing gaining competitiveness on the global stage.
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. This highlights a significant shift in investment strategies, where traditional sectors are being re-evaluated in light of new technologies and sustainability goals. The integration of AI into various sectors is expected to drive efficiency and innovation, making it a critical area for future growth.
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. The government’s initiative to promote domestic manufacturing is expected to boost local industries and reduce dependency on imports, further strengthening the economy.
Relekar remains positive on financial services, expecting improving macro conditions and easing geopolitical tensions to support domestic recovery. He specifically likes non-banking financial companies (NBFCs), vehicle financiers, and large private sector banks, anticipating that consumer and commercial vehicle loan cycles will strengthen further as headwinds fade. This optimism in financials is essential as it underpins the overall recovery, providing necessary liquidity and credit to consumers and businesses alike.
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. The IT sector has been facing challenges with the rapid pace of technological change and evolving consumer demands, which necessitate a careful approach to investment in this space.
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. The volatility in oil prices is a significant concern for economies like India, which are heavily reliant on energy imports. Any sudden spike in crude prices could lead to inflationary pressures and impact consumer spending.
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. The rapid growth of AI technologies has led to heightened speculation and volatility in related stocks, necessitating a cautious approach to manage risk effectively.
Overall, Relekar's insights reflect a nuanced understanding of the current landscape in India, highlighting both the opportunities and challenges that lie ahead. As the country navigates through a complex global environment, the resilience observed in the auto sector may serve as a bellwether for broader trends and consumer behavior in the future.
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