Sanjiv Bhasin, Director, IIFL Securities, says still thinks consumer names are going to outperform, at least in the near to six months. “We think if you have to take off some chips, take it off the momentum plays. Dixon is still one of our top holdings, and we continue to be very, very bullish on that spadce.”

Let’s start with the consumer durable space. Havells is one stock which has not moved much and has not corrected either. On Whirlpool, there was fresh commentary from the global CEO talking about the reason for offloading some stake in the Indian business. And the reason they gave was that the stock trades at an expensive valuation. They expect the valuation to come down. They clearly saw asset arbitrage. Is this space a bit heated up?
Sanjiv Bhasin: You have very marquee names that have gained market share. Even though the unorganised sector exists, Voltas, Havells and say Crompton, are really the ones which are the big players. Yes, Whirlpool in the white goods is a very expensive stock. But it has always been a brand which has been admired. It is like a D-Mart or an Asian Paints. This is a very sweet spot given that middle incomes are now rising and you have seen that across the board, there are no coolers. Everyone wants air conditioners and the advent of LED and the whole gamut of appliances which all these companies have, have been stellar performers. Voltas, also on the back of that Middle East cooling tower business, which generates about 20% of their revenue, has been in a sweet spot. Tata Group chairman N Chandra indicated that their consumer-facing arm is going to get more mileage from them. Voltas, as a disclosure, in June at Rs 750, was my top buy. And we own both Voltas and Havells from much lower level Rs 995-1000 on Havells. They may have not performed, but that is in line because everyone has been avoiding the consumer’s side of the market.

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I think rural incomes are rising and consumers are going to be the next play given the advent of preference for bigger names and brands. That is why we suggested Bata and Patanjali. But I would definitely advocate a buy on Havells. As a disclosure, both Havells and Voltas have been in our portfolio. Voltas has been a total outperformer and Havells has been a very lukewarm performance. But given the type of businesses they have and the performance of Lloyds now after the merger, they are in everything over there as far as consumer appliances go.

Have to ask you about Patym. Considering you were the patient one, still invested in the stock, what have you made of the latest move by Vijay Shekhar Sharma, messaging to the regulator that he is dissociating himself from Paytm Payments Bank by stepping down?
Sanjiv Bhasin: Finally, the ego is being let loose and they are realising that they have to think of the bigger good. It is the case like in Zee the Goenkas do not want to let go despite having only 3% stake. At least, Vijay Shekhar has made the right move in the broader perspective.

Now, we are aware that there may have been the KYC issues and they have denied any no money laundering because they do not have a foreign exchange licence. So, it will set to rest any other speculation and now with the change in the governing body, it will give a better image of the Payment Bank. It will give them time and all is in the domain of the regulator. They will wait for the report of the ED and other things for which I think they have been absolved of a lot of things. So, it is a matter of time.

On the other hand, the way they have gone about increasing the number of banks where they can share and that at least puts the business back on track. Yes, the margins and the accretives will see a little bit of a hit but we still think the longer term story of Paytm is very, very strong. We are staying put. We will wait for more. Only thing, this adds more weight on the side that now the governing body will have more teeth and at least there will be a unanimous board of directors who are more appreciated by the central bank and by the regulators.

That is what I have made out of it. Rest we will see but I still think the stock is going to see volatility. We would recommend that let it stabilise, let these things die down and then you can take your call.

Yeah, and volatility is something which will be there in Vodafone and Indus Towers as well. How should one approach the telecom sector now?
Sanjiv Bhasin: It was a scream at Rs 11 and at Rs 205. Both those stocks are in our portfolio. We think that this is a very sweet spot for the turn of things. The receivables from Vodafone means Indus is in a very sweet spot. They have already made provisions in case there is any write back. Their margins last quarter were the strongest. I still think Rs 275 is attainable in Indus and rightly so. We will wait for the Rs 2000 crore which the promoter has raised to be there and the guideline. But the bigger thing will be if they do get some foreign player or a foreign investor to pump it. They need more money on the 5G side. Their ARPUs are growing and we realise they are there. Whether you can say 2.5 players or 2.75 players, they are still half of 0.75 and on a Rs 11,000 crore turnover they did an EBITDA of Rs 4,500 crore. I think they are there to survive but the debt overhang will constantly remain as something to be addressed till they raise more capital. Let us wait and watch what the capital raising is. Indus Tower definitely is a bigger gainer because of the capital infusion.

What about the PSU banking names? Of course, a lot of them have run up? Are there any select names that you would still recommend as buy?
Sanjiv Bhasin: I would say that everything in the AB stable is doing well, AB Capital. Now, look at a stock called ABSL AMC. I have been bullish on that all the way from 400-425 level, and it has underperformed. But asset management companies are here for the next 20-30 years. I am just giving a call. It is in our portfolio. We have a very good long-term view on it.

But at Rs 500, it has just given a fresh breakout. It has hit a new two-year high. ABSL AMC in this stable is a very sweet spot to be in, given that it has the holding company of the AMC, it has AIF, it has insurance, and all put together that stock can be a real outperformer from here. I do not rule out 650 coming in the next three to six months.

Rather than the PSU banks, I would be more overweight on the private banks; ICICI, HDFC, Axis, Kotak that is where more delta will be gained over the next few months. But in the meantime, we still think SBI stands out. The rest, we will not chase. We have booked profit across the board in some of them and are turning our preference towards largecap private banks.

How much more damage do you foresee for Asian Paints before it prices in another strong player in the market, namely Grasim?
Sanjiv Bhasin: Well, first to Dixon Technology, that is one of our top holdings all the way from Rs 3,700 and we have no intention to get worried by CLSA and Jefferies. At Rs 7,000, when a stock has gone from 35 to 7, there will be ups and downgrades, but stay the course. EMS is here for the time to come. We think Dixon finally will even cross Rs 10,000. Look at the language of the management, look at the performance, look at the data which speaks for itself.

But like we said, there is an opportunity to buy and sell. I still think any decline in Dixon is a buying opportunity. Same is the case with Asian Paints. We saw the same downgrade for Eicher when Harley was launched for Hero and Triumph for Bajaj. After a couple of weak days, the stock bounced back purely on the back of Royal Enfield, only gaining market share. Asian Paints deserves to be done by a SIP.

Let the initial flurry of downgrade get over with, but that is a brokerage call. On the underlying business, it will take miles before Grasim can dent into the market share. It will be a little threat, but the pie is big enough for all to survive and Asian Paints to grow. We continue to think consumer names are going to outperform, at least in the near to six months. We think if you have to take some chips, take it off the momentum plays. So Dixon is still one of our top holdings, and we continue to be very, very bullish on that spade.

Asian Paints is something which we have not that much exposure, but we think we will add closer to that target, which most have given, which may not come in the near term, but this is one blue chip along with HDFC which you must have in your portfolio.

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