What an impressive performance Nalco has put up and what an impressive performance from the stock as well! Yesterday there was a 10% move?
Sanjiv Bhasin: 13% and I gave you a Valentine gift early in the morning. If you are an economist, you will never make money. I do not want to give gyan. I want to make money. So all your viewers made 13% there, 6% on SBI. Maruti is at Rs 11,000. Just a reminder of where we stand and pessimism at all-time highs telling us that new highs may be there today, tomorrow or by Monday because the left-out feeling is humongous.

PSUs are under-owned and results are far better than expected. So who thought that you will get 13% moves in Nalco, in BPCL. I am very confident for the broader market now and Bank Nifty. For me, HDFC Bank has bottomed out for a lifetime. It will never go to these levels again. This is the time to be buying your banks.

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Let us keep the Valentine cheer going. What are the other stocks you love? Anything from the mid and smallcap universe?
Sanjiv Bhasin: There are certain stocks which I am very bullish on. If I just did a channel check yesterday, a couple of days with UPL and the management, they are now looking to divest some of their assets to reduce debt. And they said that destocking is over.

Agrochemical and pesticide prices are rising higher. Secondly, the one-time loss of FX is going to come back. And they are relatively confident on double-digit growth coming very strongly. Their EBITDA margins were the lowest in the last 16 quarters. They are talking of a rebound. And they are very, very sure that a couple of their divestments will play very, very good results. If you recall yesterday, they have invested in a Tanzania crop production company, which means that they are now spread all over the globe. So, that becomes a value pick. My other pick is definitely going to be the continuation of NMDC and SBI. They are here to stay. As for M&M, the numbers are far better than expected. Among midcaps, I am very bullish on Indiabulls Real Estate. You cannot have the largest real estate player or a company with one of the largest land banks trading at a Rs 7,000 crore market cap. The Embassy takeover will be a huge upside for this stock. This can be re-rated for a doubler in the next one year. Dhanlaxmi Bank is another stock which has come to very attractive levels, closer to 40-42. Do your shopping over there.What is your take then when it comes to some of the stocks within the new age tech space for instance, we have got fresh brokerage notes that are out on Zomato from CLSA. You also have a PB Fintech that’s in the spotlight. How are you looking at the entire cluster? Is there anything interesting that has caught your eye within some of the recent listings?
Sanjiv Bhasin: It is a difficult call to take because Paytm has been a part of all portfolios, including ours, and that is diminishing the returns which have come in Zomato and PB Fintech. We think PB Fintech and Zomato are going to be the star performers, notwithstanding what came on insurance yesterday, today at the Bima thing and so on, which will increase the competition. But these are quasi names.

In the meantime, you can give this a second look because of the uneasiness of Paytm, the balancing of books. But most of the balance in HDFC Bank is done. We have had almost Rs 48,000 crore of HDFC Bank being sold in the last three weeks. Most of that selling was over ownership, balancing of books. That is all done with. Now, all the bad news is in the price. So, if you are looking for a bargain, and remember, bad news and prices will always come together.

This is the time because the equalisation of their mortgage side and the NIMs pressure is now on the back burner. I think NIMs will improve, and so will their credit deposit ratio. So, we are, as a house, invested as a disclosure, and we think HDFC Bank is where you should be putting your money, rather than some of the fintechs, which will see a lot of shifting amongst each other till the Paytm issue gets some resolution.

My only pushback with HDFC Bank is that it is not going to be like a one-quarter classic turnaround. I think time-wise corrections will continue. For me, the turn for HDFC Bank will come and that really could be the serious turn when the Reserve Bank of India cuts rates and liquidity comes back into the system. The size of the bank is so large that it is more like a macro event which will move the needle.
Sanjiv Bhasin: When you have state banks running up 5-5% every day, then the momentum and the mojo is there. But the same thing was said for State Bank at closer to Rs 280-300. I will give you a simple call. The NPA balloon will come after three years. At that time, you should be totally out of PSUs and into private banks. I am not saying that there is any drastic change. But most of this big book lending, credit expansion happens at peaks.

Generally, banks which are very, very conservative or which are reducing their book are better placed. I am not making the case. All I am saying is that it is not rarely that you get a two-time price-to-book on a HDFC Bank and ICICI and Axis also underperforming. This is the time you must take some chips off the PSUs and put it in these banks. Maybe HDFC does not do much for two weeks or two months or two quarters. But its history has shown that it has under promised and over delivered. So it is a relative balance within the market cycle what you want to do, play momentum in PSUs or be in value in HDFC bank.

There has been a great rally in IREDAfrom yesterday’s low. It is one of those darling stocks. Everybody has a view on IREDA and yesterday’s recovery was quite exciting, actually.
Sanjiv Bhasin: Correct. IREDA, REC, PFC, GAIL, ONGC, you named the PSU and that is telling you pessimism has been highest in the last two years. And as yet, the rally has just started. There is still room on the upside. Most mutual funds and large PMSes who said we will never touch PSUs are trying to find a way back. But I would not chase IREDA because four -five times price to book is not in my comfort zone, even though the lending space has cheaper cost of funds and so on. So you have to do your stock picking. Either you play the momentum, which is very, very strongly on the PSU side or look for select value stocks, which are giving an opportunity and may be consolidating for some time.

Sanjiv Puri was very confident about ITC growing in double digit and margins sustaining going forward. Yes, what is happening to agrarian exports is that could be a pushback. But on the BAT issue, I think the supply for a name like ITC is likely to be absorbed. Do you agree with me?
Sanjiv Bhasin: Fully agree with you. I mean, the underlying business is doing extremely well. And if you recall, there was this time when there was an overhang of UTI selling, which got absorbed by LIC and actually LIC was the one which was laughing its way to the bank. It was closer to Rs 210-220, when the deal took place. I think that at Rs 405-410, ITC is an extremely attractive stock, given that rural income will start to bounce back. The seasonal factors are very, very positive. Plus, their hotel business is doing extremely well. And all the other parameters are working in sync. I would definitely advocate a buy on ITC. The overhang of the BAT stock selling will get easily absorbed by smart investors.

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