Go contra in banks; realty stock may double: Bhasin

Sanjiv Bhasin, Director, IIFL Securities, says the IT and pharma indices are hitting new highs which is evident that the leadership has changed from banks into both these sectors. As most FIIs are now underweight on banks, now it is time to be in largecap banks.

Bhasin also says: “Given Indiabulls has a pedigree inventory and most of the damage is done, there is a new management and there will be an open offer as the demerger takes place. I still think this is one of the best reality plays and if you have a longer-term horizon, who knows, this could be a doubler.”.

Delhi is cold and the market is getting slightly cold. Is it a temporary thing or do you see some more consolidation/sideway action for a few days before it picks up?

Sanjiv Bhasin: We have seen the worst of the cold, just like the markets. It is about time to smell the coffee. ONGC, IOC, SBI, are all at new highs. Who is complaining? And yes, the dumb money is now selling the largecap private banks, which were the most sought after and getting into PSUs. So, it is time to be contrarian. I think private banks are in a very sweet spot. Two and a half times price to book you will not get HDFC Bank maybe in a lifetime.


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But yes, there is consolidation. There is stock specific action. And the reasons are a plenty. The S&P is at a new high. The Japanese index is at a 35-year high. So yes, a small correction is in the offing. But that more or less is played out. Now, RBI maintained status quo and is being cautious. RBI has been cautious because it is not going to be in line with what the US does and his credibility is more important. So I think everything is in place.

Earnings, macros, micro, all seem to be in a sweet spot. This is the time to be selective in your stock picking. Plus, China is now closed for lunar holidays for another 10 days. So it is a very good time for metals, specialty chemical names because prices could start to see rise there. And these are two sectors which have performed. So be selective in your stock picks but please be there. Do your SIP, get into good stocks and keep watching as the markets tend to consolidate and go higher in the next two weeks.

That is a brilliant point you make. You are making a point that the market could be sideways for some time, but do come out of the PSU which are getting overbought and get into the private space, especially private banks, which have not done well. Also what is your view on Zomato at Rs 145. Is it time to book out of Zomato for now or hold on to them?

Sanjiv Bhasin: Well, Zomato, PB Fintech and Paytm have been two-three of our top picks. Unfortunately, the Paytm imbroglio has hurt us also, but maybe PB Fintech and Zomato have made up for that. We are in no hurry to sell Zomato and we are a slightly longer term view. This is just one quarter but it tells you that all the Fintech plays which have lasted the times of Covid are now here to make money. Our daily habits are changing and getting more technology driven, more friendly to user capacity.

Zomato is the best place because you do not, you have to eat twice a day. That is going to continue. They have shown very strong margins. They have shown strong consolidation in their undercutting in their expenses. And we continue to be overweight this, look for corrections to get in, but this stock is headed higher.

What about ITC? It did fall on the comments that came in from BAT but that is not something that is not known. Would you still hold ITC?

Sanjiv Bhasin: ITC has underperformed after hitting that Rs 500 level because they disappointed by divesting part of their hotel business, whereas people were looking to do with their cigarette business. Now, there will be referrals over talks. But ITC maybe just over here, it will not do much, given that there will be uncertainty on the BAT stake, just like it was when UTI, which was one of the big holders, sold out.

You will have to see more consolidation on the numbers, more language from the because if BAT moves out, then the demerger of the cigarette business will also be an added advantage. You will have to wait for more colour on the communication which comes through from the management. Anything to do with the demerger of the cigarette business will re-rate this stock.

We are slightly underweight. Britannia and Nestle are two stocks which will be overweight in the FMCG basket. ITC for now is an avoid. We are very positive on Britannia and Nestle, given that rural incomes are picking up and Britannia’s foray over there is only going to gather steam.

Sure, point taken. But before I move forward, want to highlight a few big buzzers from the insurance space –New India Assurance to GIC. LIC is ahead of its earnings and was mighty excited. Earnings lived up to the expectation as well. What is your view on insurance?

Sanjiv Bhasin: Please mention PSUs. Anything to do with PSU is going through the roof. GIC, New India Insurance, LIC, who thought that these prices would be up there even three months back? So under-ownership, pessimism and, much touted “we will not touch PSUs” played out perfectly for the PMSes.

There is steam on the upside. But for the insurance space, there are five intermediaries which will be there for the next 30 years. Insurance, brokers, depositories, exchanges and AMCs. These businesses are going to keep laughing their way to the bank. Whenever you get opportunities, get into them. LIC is now a no-brainer given the numbers were the strongest.

Since LIC is a listed stock, there will be a lot of internal whereabouts about their awareness of how they have to be more market friendly and so on and that is true. When you have Adani and the PSUs performing the way they have, then obviously LIC will take home the largest cake. The pessimism was overdone. However, I still think the private insurers, that is SBI Life, ICICI Pru and HDFC Life should also be in your portfolio in this correction.

So, LIC is in focus. I also want to pick up SBI. It moved on the result day, but in the following two days, look at how SBI is gaining and went above the Rs 700 mark yesterday with 7%, 8% gains coming in. What is the next target for SBI?

Sanjiv Bhasin: SBI has just started its leg and the advent of Canara Bank, PNB and Bank of Baroda outperforming SBI was telling you that SBI will be the next one. It is a largecap, but I still think on a price, on a multiple, if there has to be a re-rating, then Rs 850 could easily be there on SBI. But like I said now there are no free lunches in the sense, these are stocks which have also rallied a lot and some of the private bankers which came out with very decent numbers. Agreed that the deposit franchise is going to be a little low, but the type of credit they expand, the type of books they are having, the type of low NPAs and asset quality, I still think some of the private banks are worth looking at, particularly HDFC Bank, where most of the pessimism is now being replaced, but SBI is headed to Rs 850.

I must also congratulate you on your call Indiabulls Real Estate about four days back at 100 or thereabout you spoke about that stock saying that the worst could be over, it has seen a lot of value damage in the last two years and you categorically called it out at hundred. What would you advise now? Book some profit or hold on to it?

Sanjiv Bhasin: Yes, thank you. On twelfth, there is the court judgment, where it will get approval for the merger with Embassy and like I told you, even penny stocks like Parsvnath and Unitech now have Rs 5,000 crore market cap or less little less than that. Indiabulls, which is one of the largest land bank owner both in Maharashtra and in Delhi, one of the largest, has a market cap of just Rs 6,000 crore.

Given that they have a pedigree inventory and most of the damage is done, there is a new management and there will be an open offer, I think, as the demerger takes place. I still think this is one of the best reality plays and if you have a longer-term horizon, who knows, this could be a doubler.

We work for the investor. When we are giving recommendations, our main criteria is that the investor makes money. And Rs 95-99 in ten days has become Rs 120. I would also like to specify 300, 350, 400, 450, 500, 550. Finally, yesterday, SW Solar hit Rs 650. I gave you a target of Rs 650-675. It has doubled. Now, if you have to take profit, take it but I still think SW Solar is good for 850.

My third pick two days back was Parag Milk. I gave it at Rs 210-220. As a disclosure, these stocks could be in our client’s portfolio. The stock hit 255 on excellent earnings. I think over the next few months, this can be a stock which can cross 300.

Pharma has come back very, very strongly and earnings have been backing that, whether it is an Orchid Pharma or even a Lupin and Cipla for that matter. What is your top pick within pharma now?

Sanjiv Bhasin: So, first a word on Tata Power. At 200, we stuck our neck out when most FIIs were downgrading the stock. That price to earnings and the multiple of receivables. It was a no brainer. The type of management, the type of perception of Tata Power has in running the utilities and the EV transition business. Never ever follow blindly some of the big names because you will miss out the woods for the trees. In four months, this stock has more than doubled and it is a largecap. I am not taking credit for that.

All I am saying is pessimism, greed and fear run hand in hand. That is why you miss the woods for the trees. And that is what has happened in the rerating of power as a sector in India. We are in a power surplus place. Receivables, the ones which are the bankers in the lending companies like REC, PFC have been multi-baggers. I am very, very optimistic on Lupin. It is in my portfolio and Dr Reddy. I think these two can go spaces.

And secondly, we know that these indices, the IT and pharma indices are hitting new highs which is evident that the leadership has changed from banks into both these sectors. Now is the time where most FIIs are now underweight on banks to be in large cap banks.

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William Murphy

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