“Three rate cuts were not there on the card three months back, now there are three rate cuts. Yields are softening, so there will still be humbug whether it is March or April,” says Sanjiv Bhasin, Director, IIFL Securities.

It appears that overnight things have turned amber there in the US, in last sort of trade yesterday as well here in India advance decline had worsened and midcaps did take it on the chin. Are you also of the view that perhaps time is ripe to take some chips off the table?
That is the clear view which is there on the market. Now, markets will always be in aberrations both on the up and down side and who is to question that. I think the type of run we have seen in PSUs is more out of under ownership and outperformance on the results. Can it continue? It surely will, but there will be a process where you will weed out the men from the boys. I think there is extreme overbought conditions in lot of the PSU basket and that could see a smart correction. Now, to comment on the US yields and dollar this is a constant foray. The Fed will not let you sleep either side. Three rate cuts were not there on the card three months back, now there are three rate cuts. Yields are softening, so there will still be humbug whether it is March or April. Markets have moved beyond. Markets are looking at growth. The US numbers as far as a soft landing are very-very strong and I think earnings is what is going to be the catalyst. In the Indian context, you are aware that for the formers there is a huge feeling of missing out, they will buy PSUs or the select largecap, but I still think there is going to be more movement into largecaps as a safety net. Midcaps can see profit booking, but that is routine and market could be in a range for some time till we get more colour on earnings. Since you spoke about earnings, are there any earnings which caught your attention?
Well Ashok Leyland I have been advocating. I think if you are re-rating Tata Motors, Ashok Leyland is now catching up on the CV side as a market share. Its bus market is roaring with IndiGo. The other part, its EV market is doing extremely well and I think Ashok Leyland deserves to be re-rated. So, I think numbers were very-very smart. I also like the numbers from Bharti Airtel, I mean Rs 208 rupees as an ARPU was a far cry one year back, of course the stock has run up.

Unlock Leadership Excellence with a Range of CXO Courses

Offering College Course Website
IIM Lucknow IIML Chief Operations Officer Programme Visit
Indian School of Business ISB Chief Digital Officer Visit
IIM Lucknow IIML Chief Executive Officer Programme Visit

Secondly, even though there was disappointment on some of the agrochems/speciality players like SRF, Tata Chemical and UPL I think they are now in an accumulation zone. So, if you are looking for some ideas, there are enough in the speciality chemical given that China’s stimulus impetus is going to come back and we think this destocking for UPL and Tata Chemical, SRF that whole basket may be done with and we could see much more traction coming faster than we thought.

So, these are contrarian players where the price is on your side but the underlying fundamentals will take a few weeks or maybe a month or so for them to stabilise.

Wanted to get in your take as well as to what the outlook is when it comes to Britannia in terms of the kind of quarterly numbers, just going by what we have seen within the entire FMCG space, the fact that they have acknowledged a rural slowdown, what is your anticipation?
I think that is part and parcel but Britannia is up for different reasons. I think there is some corporate event because the stock has been on a tear. I expect Nestle to come out with very strong numbers that is due tomorrow. For Britannia, all the numbers are in the price, there could be little EBITDA pressure of a percent or so because of the rural side but it is a superb brand to buy and I think Nestle and Britannia have been relative outperformers. Now, in the context of where they are, they are more of a play as a necessity now and I think that there will be some corporate news which is there on Britannia, otherwise the way the stock has been on one of the performers it has to be accompanied by other news. We know that the Wadia Group is looking to divest and there could be some smart play over there. On the other hand, I would say I continue to think Nestle to be a pedigree name in your portfolio at a time when defensives are going to be little bit on the positive side. You should be hiding in some of the FMCG names.But also wanted to get in your take in terms of what is happening with Paytm. We understand now that there are some startup founders, a cluster of them that have written to the finance minister and the RBI Governor seeking a review of the RBI action. What is it that you make of the developments that we are seeing in Paytm?
Well, I am also a silent spectator like most others and waiting for more news or clarity. It is a drastic measure and now as a corollary to that Jio Finance which we also own is up 16% in two days. Bajaj Finance which we have been negative has fallen like a rock. It has been underperforming. So, it tells us that there could be something more which is fishing. Just to also tell you, every day 77 lakh shares are being taken away by smart investors or people who are in the know, so I cannot comment till the RBI gives more clarification because it is not just Paytm’s KYC and other norms, it will be the whole ecosystem and we know the type of unicorn, the funding which is going around, the private equity, 62% of Paytm is still owned by FIIs, so there should be some more clarity on where we stand, whether the business retains, they will give them more time, but I think this is all in the domain of the RBI, so it will be difficult for us to comment. We are waiting as silent spectators, as a disclosure we have clients who have position in Paytm and we will wait for more colour before we can react.

Where do you stand when it comes to those OMCs, do you think that one now needs to be a little bit cautious as we are seeing in some cases a stance of valuations playing catch up?
Well, yes and no. Definitely, we have as a disclosure both HPCL and IOC in our portfolio. We still think these are excellent plays on the slightly longer term. They have underperformed for such a long time and now with both the refining margins rising, the results being outperformer and no impetus from the government, I think they are in a very-very sweet spot. Yes, but you are right they have run up far in excess in a very-very short period, there will be the provincial profit booking, but longer-term energy plays in India like all the OMCs and ONGC seem to be in a very-very sweet spot.

Talking of energy, one of your old favourites Petronet LNG, I want your thoughts on that one, very interesting news coming in on the ticker right now from agencies that Petronet LNG will renew their long-term contracts with Qatar beyond 2028, it has been a late mover compared to some of the other energy stocks, but it has started moving and the news is that they will be renewing their arrangement with Qatar beyond 2028, LNG deal could be announced as early as Tuesday. Your thoughts at 275 on Petronet, does it have more juice?
Well, we have been advocating from that 210, 215 level, at 275 it would be brave but I still think this is a super company to own, people underestimate the power of the businesses they have not just the LNG, the byproducts from that and this only reinstates that till 2028 there is going to be no disruption.

Yes, two things will stand out, the movement of the rupee and the global pricing of LNG prices. But as long as there is constant supply, we are of the opinion that India is fast moving towards more of gas-based business. Petronet will be one of the biggest beneficiaries. So, we have a long-term target of 350. At 210, 215, we did not imagine it will come so fast, but that is the speed of which PSUs underperformance is now getting corrected. So, hold or add on declines or add some here would be the advice.

Just curious as to what your outlook is, we spoke about some of the OMCs but what about the other stocks that are at life highs within the entire PSU space? The fact that even some of the railway stocks as well have been in the spotlight. How have you looked at some of these names?
We have three disclosures. NBCC, which I have been bullish since three years, did not perform. Suddenly in two months, 40 has become 170. HUDCO is another pick and last but not least I am still very bullish on IOC and Nalco. Nalco can be a huge outperformer, even can double over a period of time, but right now like you have seen there has been huge outperformance, so taking some chips off the block is not a bad idea but remember when you do get the correction, then get into these stocks because I think they are on a multi-year breakout and they are richly rewarding the patience of the last three years underperformance.

(You can now subscribe to our ETMarkets WhatsApp channel)


Source link