Bhasin further says: “Do SIPs on Hind Copper, Vedanta, SAIL, and NALCO and you should be doing extremely well.”
What is your opinion on Reliance Industries? Is it going to be the one which is going to resurrect the market from that 2% fall that the Nifty alone has had last week?
Sanjiv Bhasin: The windfall tax may put a little bit of pressure. On the other hand, their chemical business is doing very well and that I think is globally there because China is back and along with copper, there is again demand in specialty chemicals. So aside from Retail and Jio, the actual money may be coming from the oil to chemical (O2C) business and that should be a positive for Reliance because that is where they have invested in the last 10 years and now return on capital will come there.
I think Reliance and HDFC will hold the Nifty while the midcaps may have some more consolidation and profit booking because of their sharp runup and because of some of the equalising because of the SEBI diktat for mutual funds on the small and midcap holdings. But I still think it is a broader market opportunity to buy. Nifty, according to me, is going to rescale new highs by the first week of April. So, this consolidation may last another week. Wednesday is the Fed policy. I think a large part of that is already priced in. So, we think that the end of March, first week of February again we should retest those 22,500 levels on the way up on the index.
Let us also get in a take then from you as to what the outlook is when it comes to the entire consumer sector, given the fact that we are looking at lots of brokerage notes that are talking about premiumisation being the next big thing, rural consumption as well picking up. What is the outlook on the likes of even a Tata Consumer, Varun Beverages, Devyani, Sapphire, etc?
Sanjiv Bhasin: Yes, I think that is a very sweet spot and as you can see, demographic premium and aspirations are now seeing ambition to climb higher. It is the rural income which has started to consume much more of the branded and premium products which has seen Starbucks and other coffee chains do extremely well for Tata Consumer. We think Costa Coffee is biting into market share over there.
Devyani, on the back of Pizza Hut and other products, is doing very well. Same is the case with Varun Beverages. We also like Bata. Your shoes and chappals have to change and in that you are also seeing the move from Campus to Bata. We like Patanjali over there. So, a mixed bag. I think the worst of those numbers are already priced in and if any, one could start to see volumes and margins both expand on the upside. In largecaps or big stocks, I still like Nestle and Godrej Consumer but Bata, Patanjali are two stocks along with Devyani which I can bet my money on.
Election dates are finally out. Is there any tactical way to play the PSU pack? Morgan Stanley, for instance, has come out with a tactical note on defence PSUs. What about the rest?
Sanjiv Bhasin: They have had the best run in the last two years and any little bit of flip-flop can see large amounts of volatility in the stocks on the election outcome. I do not rule out more volatility because the run-up has been sharp, but I still prefer power lenders like REC, PFC. I like NALCO and SAIL in the metal space and I think ONGC can be my star over there. In defence, the order books are strong but the execution may take another two-three years. You are giving something like FY27 valuation and that justification becomes a little difficult, but we still think this basket of stocks would be some of the positives play out. Two other places which we are very positive about are construction and hence NBCC and Hudco would be key beneficiaries going ahead if the same government comes back.A word on Coforge’s fundraising plans in midcap IT?
Sanjiv Bhasin: Coforge and Persistent have been two outperforming midcap picks. There is nobody who owns more than 2% stake in Coforge and it becomes a very lucrative target for someone to acquire or take a stake and that is what we have seen in this run-up. Plus, midcap IT has given very stellar performance in the last six months. Now we prefer LTTS and LTIM given the traction on order book on defence, on digitalisation. Both those companies stand to gain but our top picks remain HCL Tech and Wipro in largecaps. Coforge was a very good buy at around Rs 5,200. LTTS and LTIM are two stocks which one should add now a little bit on decline.
We discussed a few stocks on Friday and I am just looking at the list. Indiabulls Real Estate was there. We discussed Federal Bank and we discussed Hindustan Copper. Let us take them forward. Indiabulls Real Estate up 10%, Hindustan Copper up 4% and Federal Bank up 3% on Friday.
Sanjiv Bhasin: Like I said, Federal Bank was unnecessarily the target of that little bit of caveat by the Reserve Bank on co-branding. They have just started the credit card business and it is not even 1.5% of their business. The stock came out with very good numbers. The NIMs are doing extremely well. In gold loan, they are gaining more traction.
Federal Bank for me is an outperformer on the midcap banks. As for Hindustan Copper, yesterday also, copper hit almost a three-year high, which is telling me that China’s cut in output will see the copper cathode or the underlying asset doing extremely well. Hindustan Copper becomes a proxy for that along with Vedanta and Hindalco. Vedanta has copper as a reserve, but Hindalco does TCRC.
Indiabulls Real Estate for me is the best stock of 2024, given that we think the merger date is now 22nd or 24th, which from the NCLT, once that gathers the Embassy coming on board, 12% by Blackstone, all that will add up to this being re-rated. You cannot have a market cap of Rs 5,500-6,000 on a company which has a huge land bank both in Maharashtra and in NCR. Yes, all these three, Indiabulls Real Estate, Hind Copper and Federal Bank, as a disclosure, are in our portfolio and we would use any decline to add on these.
Take us through some interesting recommendations that you are spotting within the entire metal space given that we spoke about declining for the week gone by.
Sanjiv Bhasin: Hind Copper, Vedanta, Hindalco. Hindalco would be the bottom of the order given that their capex on Novelis will see return on capital decline. But I would say one can do SIPs on Hind Copper, Vedanta, SAIL, and NALCO, and one should be doing extremely well. Also, I have a confident feeling that the dollar is going to weaken further, China demand will come back while their cut in production could see particularly the non-ferrous metals come back very strongly. In that basket, copper, aluminium should do very well. SAIL is a byproduct of the fact that iron ore has fallen is beneficial both for input costs because it is captive and the same in the case of Tata Steel. But these four-five stocks should do extremely well in the next three to five months.
