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Bhasin further says is very bullish on ICICI, Axis, HDFC and Kotak and thinks Federal Bank will be a key beneficiary of expansion of gold loans. Also, RBL Bank is giving a very good opportunity. Your portfolio should do well if it contains 4-5 of these large and midcap stocks.
What does Tata Sons paring stake in TCS imply?Sanjiv Bhasin: I think it is a routine booking of profit or reducing stake and they would be using that capital for extraneous purposes, maybe shoring up capital in other stocks or in their philanthropic causes, which do exceedingly well. I think it is part and parcel of the proceeds which they do systematically over a period of time. It will be a welcome step in the sense there will be enough people who will put their money where their mouth is. It should also see maybe a large part of the foreign portfolio be in, which should actually be better for the rupee. I think it is a part and parcel of how Tata Sons manages its resources and how they are reducing stake in the biggest hallmark company of the Tata Group, that is TCS.
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Also, on TCS, in the last five years, they have done three buybacks and if you did tender in the buyback at a premium and did not buy, then you missed out on huge capitalisation, 2,500, 3,500, 4,500, these were the three buybacks, if I am correct and each time the market, after tendering in the buyback, the stock has been up 40% from there. I still think TCS is a numero uno stock and at any price, it should be a jewel in the crown in your portfolio.
How are you looking at competition heating up within the paint space? Birla Opus is pricing their products 5% cheaper versus Asian Paints, what do you make of it?
Sanjiv Bhasin: This is going to be part and parcel of the paints business because we have seen that as housing and construction and capex pick up, the paint industry is going to be very much in demand. I still think there is room for two-three players, particularly the niche ones. For Grasim, it is a win-win point given that they are using their other businesses, VSF and other the part of that and cement to use that as a corollary for paint and diversification is a very big key.
I still think Asian Paints and Berger will be able to manage their market share. I think that Asian Paint will continue to be number one. They have about 53% market share in the decorative segment. A little bit of price war may have an initial impact but longer term, there is enough room for all three to survive.
How are you looking at the power space given that we are looking at a mammoth shift from coal to clean energy now? How are you looking at some of these power stocks?
Sanjiv Bhasin: We are very bullish on the power financiers, particularly REC, PFC. From solar, wind, and now Modi ji announcing Rs 1 lakh crore on renewables and solar panels. The lion’s share of that goes to REC, PFC. NIMs have been the best ever in the history of the company and the guidance which we have from the company’s results will be the best ever.
Thirdly, state electricity boards’ receivables are at the highest ever. All three parameters work excellently for power lenders and diversification of business. Power is in a surplus position. All work well. On the other hand, we also know that Coal India has been a stellar performer over a period of time as merchant coal prices have been extremely positive. But the realm of things is that sooner rather than later, clean energy, green energy, all this will play out.
Right now, I think there is still a time lag. We would place our bets on NTPC, but REC, PFC would be our two top picks. We think this quarterly results will be the best ever in the history of the company and like I said, diversification across the board in all power verticals is seeing very-very good upside on revenues and net interest income and margins.How are you looking at the entire tyre space, given that domestic rubber prices have jumped nearly 23% sequentially?
Sanjiv Bhasin: It is going to be a key negative for the tyre companies because sales have also reached a peak and if rubber prices, the way they have moved, is telling us that the commodity prices are here to stay and that is why we have been bullish on metals on the China comeback and we think that that is going to hurt margins quite substantially and you have seen the stocks particularly MRF, Apollo, CEAT, all hit all-time highs.
So, yes, profit booking would be the key over there. We think this is not a temporary uptick and could last some time. As this stabilises, we could see some pressure on margins because it is not easy to pass on the price hike right now. So, sell-on-rise would be the key over here. Book some profit, get into some of the better names, like we have said, metals, speciality chemicals, those are looking very attractive and some of the largecap banks are outperformers. Along with that, key lenders, REC, PFC, are giving very good entry opportunities after the recent correction.
So, what are your top metal and speciality chemical ideas?
Sanjiv Bhasin: So, like I said, SAIL, NALCO and Vedanta are three picks which we have. Tata Steel has been a big outperformer. We will have to see how the Talbot plant coke shutdown will affect because that will mean that there will be some input cost. For Tata Steel, the next re-rating will be as fast as they can get a hand on the unions and shut down some of that or sell some of part of the assets of Corus.
But for us, it is SAIL, NALCO, Vedanta and the Jindal twins. We think those are the best stocks to buy. Alternatively, buy a mutual fund which has exposure to commodities and metals, that could be a real outperformer in the near term.
What is the outlook then when it comes to the largecap financials in terms of your pecking order?
Sanjiv Bhasin: We are very bullish on ICICI, Axis, HDFC and Kotak and we also reiterate that Federal Bank will be a key beneficiary of expansion of gold loans. They are now arguably in the top five bracket of gold loans and agri and the franchise of liability is doing extremely well as they are the largest recipients of inflows from the south. Along with that, we think RBL Bank is giving a very good opportunity. If you bought four-five of these largecap and midcap stocks, your portfolio should do just well.
Wealso feel that all the negativity on the higher yields and the stronger dollar is built in. Tomorrow could be the D-day for us with the Fed now seemingly prepared that rate cuts are on the way. Yields are set to fall and the dollar is set to weaken, which means banks will be in a very sweet spot over the next few months.
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