Sanjiv Bhasin, Director, IIFL Securities, says one should not ever underestimate the bull momentum in Indian markets. Indigo, Ashok Leyland, Dhanlaxmi Bank and Nalco should be outperformers.

Bhasin says he still thinks that at 2.5-2.8 times, HDFC Bank will be a good play. He is more bullish on Jio Finance on a longer term and would give Bajaj Finance a miss.

Cannot take your eyes off from Reliance what a massive 150 point contribution to the index alone yesterday. What is charging up Reliance?
Sanjiv Bhasin: You have to have conviction. Do not ever underestimate the bull momentum in Indian markets. Yesterday, Dow Futures were lower when we closed, but seeing the Indian momentum, they closed at all-time highs. So we are, for once, the trend changer or the trend leader. And yes, Reliance did take my breath away. I have been positive that Rs 20 lakh crore market cap will come. Sum of parts, we think the unlocking of telecom and the retail business could be on the cards. They are one of the largest growing groups which is diversifying into the best of businesses after the OTC chemical. OTC business became cash rich.

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We never can underestimate that; if HDFC Bank lags, then what will pull up the market? So we are going to be at new highs and the people on the sideline will keep waiting for corrections. This goes on to show one should never say never to the stock market. Those funds which said we will never touch PSUs are biting their nails. NBCC is at all-time high, GAIL at all-time high, ONGC at all-time high, I can go on. So keep riding the momentum and buy good stocks when the market gives you the correction.

And who better than you to give that list of good stocks? Tell us what are your top PSU picks where people can still buy in and ride the wave?
Sanjiv Bhasin: I still think NBCC, HUDCO are going to give you a surprise on the upside. Nalco and GAIL are looking very good on the energy and the gas side and so is NMDC. But I think the star could be Indigo. I travel almost every weekend. Last weekend was Surat, this weekend was Ahmedabad. Flights are back and running. The fastest change around time is Indigo. This quarter, their numbers on Tuesday will see a profit of more than Rs 4500 crore. Given that fuel prices have been low, traffic at all-time high, wedding booking, there is not a single seat to stand.

So you can imagine that whenever a luxury becomes a necessity, that is the change you have to look for. I am very positive about Indigo. I think that 3500 can be on the cards once we get close to the Budget. New highs are very much on the card. My other pick would definitely be Ashok Leyland. Again, the conduit from the bus terminal to the aircraft and which is seeing the fastest expansion in buses which they have not seen in the last five years, given the rejuvenation of school meetings, board meetings and the demand for their EV side.

And third, last but not least, would be Dhanlaxmi Bank, which I have been recommending from that 38 level. This is one of the best banks to buy from Kerala, aside from the PSUs which I have already said. But Indigo, Ashok Leyland, Dhanlaxmi Bank and Nalco, these should be outperformers.

What about your reading then on Vodafone in terms of the kind of numbers that we saw, the subscriber as well, the kind of subscriber addition numbers that we saw for the telecom space. Yes, you had the overall net losses for Vodafone narrowing in the December quarter. What did you make of that?
Sanjiv Bhasin: So positive at least they have guided you that 2000 crore is coming from one of the promoters. We will wait for more funding, but they are on the anvil of getting into 5G and they are gaining market share at the cost of the others in 3G, in 4G. I think their net ARPUs have been very-very strong at 145. And if you compare that with Reliance at 190 and Bharti at 200, I think there is a scope on the upside on that. And now for Vodafone, the only issue is the funding. As we have said, they have no obligation towards any bank which has defaulted. Their dues are mainly due to the spectrum and the interest charges which have been converted into equity from the Government of India. So if you have the wherewithal to sit through, once the funding happens, the stock can be re-rated. We bought it at 10.5-11. We also gave an exit at 18.5 when we thought the run-up was quite fast and sharp. And we will wait for more developments on the funding. The key here is the funding, which will infuse capital and which will give them the wherewithal to go faster into the 5G space.

Just taking a leap from what you said that the dominance is now back to the PSU names. What about the erstwhile financial favourites? HDFC Bank has clearly not participated at all. In fact, it has been on the downtrend since its numbers. And now looking at Bajaj Finance’s numbers as well, there has been that mild dip in asset quality because of the personal loan slippages. You think the heydays for a Bajaj Finance, HDFC Bank are behind us?
Sanjiv Bhasin: Well, like I said, never say never. Sometimes these opportunities are God-given. If you have a longer-term view, you know the brand which HDFC has and Bajaj has always been stellar. And I think the asset quality, the overall branch reach-out has been very-very dynamic. Now, these opportunities do come but what has happened is because of over-dependence by large mutual funds and those PMSs on these two stocks, they have lagged the broader market. Your performance is measured against the broader market outperformance. Who said that the midcap index is again hitting new highs, which tells you that now you want to be in faster-moving stocks which in the short run can be beneficial but in the longer run can be a little more painful because there can be profit bookings. I still think at 2.5-2.8 times HDFC Bank will be a good play. I am more bullish on Jio Finance on a longer term and would give Bajaj a miss over here.

What do you make of L&T? What is the expectation because this time around, we are expecting the order flow to be a little bit flat. How are you looking at the quarterly performance and how has L&T performed?
Sanjiv Bhasin: L&T has been a core constituent of this rally. It has the biggest legs in the market. And, quietly it has made its way to all-time highs, despite the pessimism about margins and so on. Margins have been strong, they have been in high double digits which has never been the case for L&T for many years that I have tracked it. But if you see bonhomie on capex, it is across the board, Cummins, ABB, Siemens, you name it.

Numbers will be taken with a pinch of salt. The stock is already priced in all the good news, but it continues to be the best play on the Indian capex whether it is hydrocarbon, electrical, infrastructure, and only gathering momentum. We think the stock is expensive and fully priced but it is a core constituent given the outlook for the capex. We think these five stocks, Siemens, ABB, Cummins, L&T, and Bharat Forge are key players in this whole space and will continue to be market performers.

Jio, Reliance has moved up. Will Jio catch up?
Sanjiv Bhasin: Jio Finance has made huge bottoms around 200-205. Now there is the unleashing of the business. The group is very bullish on intermediary and financial lending and the whole fintech basket. They are progressing extremely strongly. I met the Jio management some time back in Amritsar and they were gung-ho on how they are into lending of all sorts including insurance, AIF, and the whole gamut. So finance is not a problem.

They have got a credible partner in Blackstone. And if anybody is going to take market share from Bajaj over a period of time it is Jio. Like you said, when did you last see Reliance move from Rs 15-16 lakh crore to 20 lakh crore and the maximum move has come in last week. It has been the balancing act for HDFC Bank’s underperformance. I still think Jio, with a two-year view, is a must-have in a portfolio.


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