Sanjiv Bhasin, Director, IIFL Securities, says “five stocks have been very bullish and which we own – ABB, Siemens, L&T, Cummins and Thermax. We are very bullish on all those five names and you can pick and choos. These are not cheap stocks. They have been hitting new highs. But it is telling us the underlying effect of capex coming after 20 years where these companies are now cash generating like never before. Also most of them like Cummins and ABB have no need of debt. They are expensive stocks but will continue to remain in that basket.”

Let’s start with Paytm. I know you have been holding the stock and you think that it will find its way eventually, but have you added any positions in the recent decline?
Sanjiv Bhasin: We have desisted from that. In fact, we have added our position in PB Fintech. PB Fintech, Paytm and Zomato we hold in similar quantities. The other two have outperformed and this one has underperformed. So we will wait for more colour. As you are aware, there are a lot of foreign institutional investors and the clarity has not been so forthcoming. So we are aware of the downside in the sense that most of the negative news is getting priced in and people who had to exit but let us wait for more colour. The management sounds very optimistic that they have been able to retain a lot of the positives from the RBI and from what I learned, the ED has found nothing untowards towards anything to do with FEMA or what we call Hawala or something like that. I think it is better to wait for more colour. Paytm, QR, Soundbox, all are as good as they have been before and we will wait for more information but we will not enter. It is not worth putting good money after bad till you get more clarity. So we are desisting from adding any position.

On Friday, there was a nice move in smaller pharma names led by Ipca Laboratories. Glenmark, Biocon of course as well held out very nicely. Any buy call within pharma?
Sanjiv Bhasin: We have had Ipca and Glenmark from much lower levels, close to Rs 550 on Glenmark and close to Rs 820 on Ipca. We still think that that is a very sweet spot as are the midcap IT plays but I think the earnings have been supportive of their growth and this was a misnomer that after COVID they will be downsizing. I think pharma has been one of the best indices along with IT and I think now it is the turn of metals to start roaring as China comes back.

As a disclosure, both Glenmark and Ipca are in our portfolio along with Dr Reddy and Cipla. And Lupin has been our dark horse which has almost doubled and still looking good. So I will go with Lupin as my top play in pharma.

What is your take on MCX? UBS is upping the target price and saying that at 40 times the valuation is justified because the growth part looks strong. Your view on how things have unfolded for MCX?
Sanjiv Bhasin: MCX was very sweetly placed at Rs 1700-1800. At Rs 3500, it has more than doubled. But, five themes are there for the next 20 years. Exchanges, depository, stockbrokers as in where I come from, insurance and AMCs. I think this business is irreversible. As you see, the premium on the NSE also starts to be slightly on the upper side, on the unlisted space.

The best play here is MCX. We have a contra call and a buy on IEX. And we think that people are ignoring the woods for the trees. They are missing the woods for the trees. IEX has 85% EBITDA on its margins. And you know what will happen? There may be plateauing of the rates. But the volumes in the next three-five years will be 10 times what we have seen. I think IEX is a dark horse on the exchange and power exchanges are here to stay. So MCX, like we said, is in our portfolio. But IEX is something where we have put a lot of money around Rs 120-125. We think this is a doubler in the next one-one and a half years.

What is your take as well on the entire capital goods space. Just today, there is a Citi report on Cummins as well where they are increasing the target price. If you had to cherry pick especially with this overall capex thrust, manufacturing boost, etc. Where is it that you would be placing your bets?
Sanjiv Bhasin: Five stocks have been very bullish and which we own – ABB, Siemens, L&T, Cummins and Thermax. We are very bullish on all those five names and you can do your picks and chooses. These are not cheap stocks. They have been hitting new highs. But it is telling us the underlying effect of capex coming after 20 years where these companies are now cash generating like never before.

Also most of them like Cummins and ABB have no need of debt. They are expensive stocks but will continue to remain in that basket. So buy a basket of these five or buy some mutual fund which has exposure more towards capital goods stocks because individual stocks may or may not make it to your desired levels of profits. Any view on MTAR Tech?
Sanjiv Bhasin: We have stopped tracking the stock. That stock went out of our realm and it came down for reasons when the promoter sold, we bought some of it and we encashed. We want to stay with largecaps. In largecaps, we continue to be overweight on HCL Tech. Tech Mahindra is another stock which I think can outperform and Persistent and Coforge are four of these stocks which we are very bullish on.

IT has been a star performer along with the Pharma and I think they will continue but look for good names. Tech Mahindra has undergone what it had to. In the BFSI space they are seeing a lot of traction. The new change in the management is very, very optimistic. They are now aggressive in their forthcoming bids and I think Tech Mahindra can be a relative dark horse. Plus, we want to be in heavyweight so HCL tech, Tech Mahindra, Persistent and Coforge are four stocks we would recommend. MTAR is not something which we are very gung-ho over. After the recent run-up we think there should be some plateauing over there for some time.

We have to discuss PSUs and have to get your top three ideas from where you still think there is value on the table. I know you flagged off power as a sector already but anything beside that?
Sanjiv Bhasin: First we will go back a month back when Hero Moto was at Rs 3700 and there was a downgrade to around Rs 3300. I said Rs 5000 is coming in Hero Moto. By the way, we have hit Rs 5000. When it was at Rs 14,000, I gave Rs 25,000 as a target for Bosch and people were laughing. In fact, it hit Rs 28,000! So do not underestimate the power of a bull market in stocks and sectors which have not performed.

Similar is the case with State Bank, Canbank, PNB, which from Rs 40 is at Rs 130 and raring to go. In REC, PFC, every quarter the numbers justify the re-rating of the stocks. I am not advocating a full-fledged buy but there is room for outperformance in certain stocks and sectors. So do your homework. I still think among the largecaps, you must own NTPC. Now whether you buy it at this price or slightly lower, is all up to you. And like I said, the comeback in commodities is now going to be a play on China. I would be very bullish on metals and Tata Power continues to be one of the best picks over there but on declines.

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