Demand outlook for FY19 is positive across segments, driven by healthy rural sales momentum, expectation of normal monsoon for the third year in a row, and a pick-up in economic activities. Key threats to demand are posed by inflationary fuel prices and higher interest rates. Our top picks are Ashok Leyland, Bajaj Auto, and Hero Motocorp among the large caps, and Lumax Auto, JBM Auto and Jamna Auto among the mid/small caps space. We continue to like MSIL's unique moats, although valuation leaves little room for an upside. Automobiles sector will report a stellar quarter in 1Q led by strong recovery in rural demand, government spending on infrastructure, new launches and low base(led by BS1V and GST transitions). Most OEMs are likely to report high double-digit revenue growth, with Ashok Leyland (+51% YoY) Bajaj Auto (+45%) and MSIL(+28%) being the stand out performers. Excluding TTMT, Auto OEM universe is expected to post 30% revenue and 43% YoY EBITDA growth. Even Auto Ancillaries would also mirror this strong revenue performance(+28 % YoY)