Sanjiv Bhasin, Director, IIFL Securities, says “there is still room on the upside for power stocks despite the rally. But most of these stocks have already outperformed in a big way. However, we are in a power surplus situation which means recoveries are the key over here and distribution transmission losses must be at the least. So, I would go with Tata Power and NTPC. Also, on declines, add REC, PFC. These four stocks are in our portfolio also.”I wanted to take a leaf out of what the minister said at the Global Business Summit and especially the power minister, in whose words, power sector is the biggest game in town and that is the space where all the action is. He is very categorical that he expects the pace of reforms to continue or accelerate. And hence, the rewards in the stock markets will continue. He said the power sector is the space that will reward you the most. Do you concur with the view?
Sanjiv Bhasin: Well, firstly, take it from the PM. He said in his third term, we will be the third largest economy in the world. Which means the market cap will double in the next five years. So, purely the direction is clear. It is just that we want them to come back. I think the power minister’s work has played out exceptionally well. Particularly, the recovery from state electricity boards, the strengthening of the mechanism of payments. All this happened after COVID. REC, PFC have had the best asset quality and best what we call NIMs in the industry.

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I still think there is room on the upside. But you have to take it as a pinch of salt that most of these stocks have already outperformed in a big way. However, like we said, we are in a power surplus situation which means recoveries are the key over here and distribution transmission losses must be at the least. So, I would still go with Tata Power and NTPC. Also, on declines, add REC, PFC. As a disclosure, these four stocks are in our portfolio also.

Meantime, let us also get in your thoughts then on Hero Moto Corp. How are you reading into the kind of quarterly numbers that the company delivered? I know one of your favourites within this entire auto space is Ashok Leyland. But what else are you tracking?
Sanjiv Bhasin: We gave this call to you that it will be Rs 5,000. There was a downgrade closer to 4,200. I stuck my neck out that Hero’s numbers will be the best ever in the last 18 quarters and proof of the pudding lies in the eating. Every third motorcycle which is being charged is a Hero. Secondly, their new launches have done extremely well. With rural incomes picking up, the stock has done extremely well. However, at 5,000, there is not that much room on the upside so look for decline but it continues to be one of the outperformers along with Bajaj.

That is because of the last two years’ underperformance due to no pickup in rural incomes. This was a laggard. But the numbers have been stellar. We are all awaiting the launch of Harley. I have even booked one and am waiting for my turn to come. That will be the next game changer over the next four quarters.

In the interim, we have seen a very ranged move from the entire sugar pack as opposed to what most of them clocked say about a year and a half back. Do you think the meat of the rally in sugar is behind us?
Sanjiv Bhasin: Take the case of Bajaj Hindustan. It was 6.5-7 rupees a year and a half back. That is when we really said that a BIFR case cannot be the type which will not revive. Now, it is up seven times in that space. So do not expect stock market returns to come. But the back-ended results have been very positive. The crushing season is over. We have seen a hike in SAP prices. All good news may already be in the price in sugar stocks.

I think that now soft commodities may be headed lower, given the type of news flow from the government on non-exports and so on. So it’s a status quo on sugar, Balrampur Chini continues to be our favourite pick over there. As a disclosure, Bajaj Hindustan was in our portfolio about one and a half. But that tripling four times made us greedy. So stay the course, but be with largecaps like EID Parry, DCM Shriram and Balrampur Chini. These are the three stocks you should be in. But there are better sectors which can outperform sugar in the near to medium term.

What are your thoughts on ONGC after the rally in the stock?
Sanjiv Bhasin: Well, we continue to be overweight. A disclosure, it is in our portfolio. We think this is the best energy stock to own in India. It is very, very reasonably priced. The sheer weight of ownership is at the lowest we have seen and pessimism at its highest, just like in HPVP. I do not rule out targets of 325, 350 coming. And that may come faster than we thought. This is going to be one energy stock you want to buy on any decline and add in your portfolio. Whether you take the case of PB Fintech or Zomato, even Nykaa was not very ugly and now Honasa as well. Do you think that time is coming again for all of these new age tech companies per se?
Sanjiv Bhasin: Well, yes and if you leave aside the Paytm fiasco, they are all reporting very, very strong numbers. In fact, Paytm will also come out with strong numbers. But it is surrounded by controversy. So yes, as a disclosure, PB Fintech and Zomato are two of our topics. We also own Paytm, unfortunately, and we are suffering. But PB Fintech would be my top pick given that the management guidance talks of extremely positive growth, and they have surpassed all expectations. This is one stock which you must add here, and on decline, this could be the biggest fintech gainer in 2024.

Your thoughts on LIC? Finally, it has begun its move.
Sanjiv Bhasin: Well, it should have done that much before. If the PSU pack market cap has gone up five times, Adani market cap has gone up three times, LIC was a no-brainer. Given that, now their APE has grown aside from the private insurers. And also, they are now very, very careful about how diligence goes, how transparency comes because it is a listed stock. I would expect more upside after some consolidation. And like I said before also, insurance is a must-have in your portfolio. One must combine some of the private insurers with the PSU. So, LIC, New India, SBI Life, HDFC Life, if you did a basket and kept your time horizon slightly longer then, like you said, even at 22,000, these are very, very good plays with a longer term view.

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