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Sanjiv Bhasin, Director, IIFL Securities, says , “private banks are now a much better space to grow rather than some of the PSUs. So, take some money off the PSUs. We are not saying totally exit but get into some of the quality largecap private banks including HDFC Bank. There will be a gradual incline and at a two-time price to book, HDFC Bank seems to be the largecap that can move. We are optimistic on all three – HDFC, ICICI and Kotak.”

The Zee Entertainment stock continues to entertain. This morning again there are reports coming in which suggest that the merger talks are back on the table and probably we will hear more updates in the next 24 to 48 hours. What should one do as an investor or a trader?
Sanjiv Bhasin: Lovely news being played out with both Paytm and Zee being contrarian. We hold both the stocks and we told you, you cannot get entertainment in India of the size of Zee at Rs 14,000 crore. I think there will be a huge breakthrough and if it does become an MNC, then God willing 350, 400, 500, anything is on the cards. All you have to do is go through this in the next 48 hours. I am very positive. Whatever the differences are, both the parties are sitting down. We will leave it up to that.

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But like I told you, there was accumulation by smart money and it is at a throwaway price of Rs 180. So, if you are waiting for the news, go ahead and take a call, buy some stocks now and I think you will be richly rewarded. If this MNC play goes off, it will be a game changer for the media space and Sony presence will be well advocated in the stock price and the results coming from it. As a disclosure, Zee is in our portfolio and it has been a little painful. I think after pain, gain is going to be very much on the cards.

What are your thoughts on the Kotak Bank rejig?How are you reading into all of these developments? What could it potentially mean for Kotak Mahindra?
Sanjiv Bhasin: Clearly Kotak has been one largecap bank which has disappointed. We were optimistic given that they are in all businesses which are doing exceedingly well. The lacuna after Uday Kotak’s exit has left unnecessarily pessimism. The results, the numbers, the net interest income, margins all seem very steady. They have been one of the best profiles and lowest NPAs. The rejig should do well.

Also, as a disclosure, we think private banks now are in a much better space to grow rather than some of the PSUs. So, take some money off the PSUs. We are not saying totally exit but get into some of the quality largecap private banks including HDFC Bank. They have clarified that they are not going to give in to lower NIMs just for the sake of deposits. There will be a gradual incline and at a two-time price to book, HDFC Bank seems to be the largecap that can move. We are optimistic on all three – HDFC, ICICI and Kotak.

Let’s talk about Godrej Consumer (GCPL) as well. The numbers have been good this time. They have outperformed the FMCG pack. Yesterday, they announced a reorganisation of their East Africa business and the divestment there. How are you looking at GCPL overall?
For the last two years, this has been one of our top picks and it has outperformed the FMCG basket. We have been close to Rs 650-670 and we were recommending very strongly that their Malaysian-Indonesian market growth will be in high double digits and that is how it has played out. I think that they are focusing well on a lot of models abroad and given the franchise, which they have, I think they have a huge market share to gain over there. Yes, there will be a little bit of EBITDA loss because of expansion, but the brand is very well enriched. I would not buy it here. As an alternative, Dabur fits the bill perfectly. This stock has not done much. The management is very-very optimistic and I would rather take some money off Godrej Consumer and add into Dabur. Both these stocks are in our portfolio. We have booked profit in Godrej Consumer and are now more bullish on Dabur as an FMCG player. Also, FMCG now will start to rear up as rural incomes go up. You cannot just have motorcycles doing well. The other basket of staples will now perform. Dabur would be my top pick in the FMCG basket.What is your take on Coal India? What is your outlook given that a lot of brokerages have come out with their view on Coal India saying that valuations are fair, but dividend yield still remains a little bit elevated?
Sanjiv Bhasin: So, it is difficult to give a call on a stock which has been a multibagger; from Rs 220, it has gone to Rs 450. Do not chase it. All the dividend yield good news is in the price, the best of the earnings are priced in. Thermal capacity is also very well priced as far as power goes. I would take some chips off the block in a large part of the PSU basket and try and get into other names. Like I told you, private banks; insurance, SBI Life is something which is our top pick. We like Dabur and a whole host and Zee, why not take a little bit.

This is a good time to take some money off the PSUs. You will be leaving maybe 5-10% off the cuff, but you are encashing some of the large gains which these companies have had. They are large commodity players and yesterday they said that their output is now on a decline, which I think should see some amount of consolidation if not correction in the near term.

Let us also get in your thoughts on the entire domestic tourism boost, how you look at that, really benefiting companies and the entire travel sector as a whole. What do you like?
Sanjiv Bhasin: We have liked IndiGo, Indian Hotels and the entertainment side. We like Ashok Leyland which is the largest bus carrier as a corollary to that. But we are seeing across the board, apps which do the bookings, the other conduits of that, EaseMyTrip, MakeMyTrip, all those do extremely well. A large part of that is built in the price. There are no free lunches. Ashok Leyland would still be my top pick. But I want to stress one point, there is always this provincial overhang of over ownership of stock, maybe like an HDFC but once you see clarity on numbers, management and the guidance where they are not ready to sacrifice NIMs and margins and the profitability still remains on a steady weekend. They have also guided on the LDR ratio, which over a period of time will decrease.

I think this is a quality time where you want to be in less riskier areas and in steadier businesses like HDFC, which may not do very much for the next one or two quarters, but then you never get in 10 years an opportunity to buy two-time price to book, the fifth largest bank in the world. I would be very steady on SBI Life, HDFC Bank, Dabur, and Zee. These are four-five names which have pedigree in their NIM. The broader market is looking overbought and a little frothy. Be watchful over there.

Do you believe that some of the largecaps will lead the way in the next leg of the up move, if at all, we were to see that play out after maybe a phase of consolidation?
Sanjiv Bhasin: Yes, and clearly Reliance has been at the forefront along with maybe a TCS and I think now it is about time HDFC Bank added weight to the Bank Nifty. I think Bank Nifty’s earnings, the Bank Nifty support, the Bank Nifty’s underperformance should be coming to an end. If we get past 46,500-47,000, then Bank Nifty will lead the way. It is now time for HDFC Bank to give support to the market. Both HDFC and Reliance have a large weightage on both the Nifty and the Bank Nifty. We are very confident that these two stocks will be outperforming.

I know your view on Paytm, but what is the view on PB Fintech, even Zomato for that matter?
Sanjiv Bhasin: We hold all three in equal quantities, slightly more on PB Fintech and Zomato because of the gains and we intend to hold that basket. Paytm, as you know, has been an underperformer. So, we are waiting for some more colour on that. Maybe the worst is priced in, but it will take some time before you digest all the news flow and the weak hands move out.

PB Fintech is one of our star performers, but at Rs 1,000, we will not chase it. We will just be with it. I would also like to comment on one more news item which people may have missed. Vedanta is looking to sell some of its steel business which it acquired about eight years back and that is now going to be sold at a substantial premium. The talks on the paper are that one of the ex-ArcelorMittal persons is buying it in a fund and Vedanta’s underperformance is there because of the huge debt overhang.

I am of the view that in the metal basket, Vedanta is a dark horse which can be a huge outperformer given its presence in all businesses from oil, gas, thermal power, and the other commodity basket including silver, platinum, zinc, aluminium, and copper. If this news flow is good and the debt is reduced, then this stock can be re-rated on the upside. A disclosure, we are accumulating Vedanta and we are very optimistic on the metal cycle.

Autos as a pack has been doing really well, what is your view on that and where does the preference lie — two wheelers, four wheelers, within that as well, tell us your top bets?
Sanjiv Bhasin: Maruti, Bosch, are all doublers. I still think there is more steam. Tata Motors and I would still put money on Ashok Leyland given the ascent into all businesses. The bus market is growing rapidly. They are 53% market share in the bus market, third largest in the world. I continue to be overweight on Maruti. I had given a target of Rs 8,000-12,000 and little did we know it will be there very soon. Same is the case with Bosch. Rs 25,000 has now become 29,000 and Rs 32,000 is very much on the cards.

Ashok Leyland has been an underperformer which can catch up and Hero Moto is one of my top favourites at Rs 5,000. There are no free lunches now. So, do your stock picking. A disclosure, these have been in our portfolio for some time and relatively outperforming. But we think auto and real estate are something where you should take some chips off the block.

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