Yesterday was a bit unnerving with the market hitting one-year low and all sectors coming under pressure. What is this indicative of? Can we erase those 2024 gains completely?
Sanjiv Bhasin: In the short run, we are definitely very oversold in anticipation of the Fed news and some of the profit booking which has more to do with the SEBI diktat, the midcap pressure and balancing of books. I am very confident we will defend this level. We should see 22,300, 22,400, closer to that, and we will take it from there.

However, after eight days of decline, . I think we have seen most of the capitulation taking place. This is generally the time when the markets start to rebound and we expect a strong rebound, particularly in the largecaps where the smart money has been moving in over the last one month. So, yes, select midcaps, but largecaps are going to outperform. We have bottomed out in the short run. The Fed move will be one of the events, but once the event is over, like I told you after Holi we are looking at a retest of maybe the previous highs; the Nifty is going to lead the market from maybe today onwards.

I am guessing now you would be ordering your food, considering you are a vegetarian as well, on the pure-veg fleet on Zomato?
Sanjiv Bhasin: Well, you are right. I am a vegetarian and I think Zomato is now slowly getting more traction. They are innovating their product line, distribution line. So, the stock is going to do well. We have had a buy on this stock since much lower levels, at closer to Rs 50. We still think this has more steam. But the veg part will be well accepted by the majority of the people, including me. Social media will keep having its own issues on how to troll and for what, but I think this is a very welcome move.

What is the view on UltraTech and given that the CCI approval for the acquisition of Kesoram has been received at close to Rs 7,600 crore?
Sanjiv Bhasin: UltraTech is arguably the largest player in the country. Kesoram is one of the group companies. First, they consolidated the business from Grasim. They took over some of the assets from Jaypee and they are in the process of consolidating their business. Arguably, now we will see the best season for construction and cement demand rising. Input costs have fallen. This would be a very big positive. They would now reach somewhere in the range of 145 to 150 million tonnes, which arguably is more than both UltraTech and Ambuja put together and double of that.

I think they are consolidating their presence in the market. We know that 53% of cement sales is in the hands of five players and UltraTech on any decline would be a buying opportunity. This is one of the pillar stocks of the Nifty and we think that construction activity as it gains more momentum UltraTech once price rise comes will be a much better placed. Also, petcoke prices have fallen reasonably which should aid their margins.Meantime, some of the other stocks that will be in the spotlight include IndusInd Bank. Remember, we just discussed how they said that the cost-to-income ratio is expected to improve by about 100 basis points in FY25 and FY26 each year. Is this coming in as a positive?
Sanjiv Bhasin: Correct and I heard that they are also seeing intense competition as far as the deposit of liability franchise is concerned. But they are garnering themselves. What has happened is along with HDFC, some of the marquee names have not cut rates and that is what has set them apart because, yes, the credit-to-deposit ratio has been on a little skew, but it will even out. The credit cost guidance reduction is a very big positive. IndusInd has been one of the star performers as far as the private banks go and their biggest niche area being the auto sector, that is where they will really be much better placed as auto sales are at an all-time high. This is a very good fit after this correction and I expect Bank Nifty to lead the winners this time, particularly among private banks. IndusInd, ICICI, Kotak, Axis, HDFC – the whole basket is looking very strong.

What is looking good amid the underperforming FMCG basket? Where is it that you are finding pockets of value in a market like this?

Sanjiv Bhasin: Two of the picks have been Nestle and Godrej Consumer and they are in the largecap. Bata and Patanjali are two names which we have. Patanjali has got in the eye of the storm after the recent Supreme Court talk on the ads regarding the medicine, but that is a passing storm. The type of growth we are seeing is unprecedented, particularly in tier II, tier III cities and their margins are bound to expand. So, be a little contrarian, pick up Patanjali around these levels. We think this is a passing storm and it has only more talk rather than actual effect on the underlying performance. The company has been an outperformer.

We think this is the best time for rural incomes to grow. Bata is the other pick which is a very strong play on the contract side, margins expansion and the advent of people moving from Campus to the Bata brand. Brand aspiration is what drives it. Nestle and Godrej Consumer remain two of our top picks and we think that they are the ones which will gather more market share as this rural consumption starts to pick up and Devyani also. I did not mention Devyani in the QSR, that is our top pick.

Are you looking at LT Foods closely?
Sanjiv Bhasin: Yes, we had a buy on it closer to that Rs 35-40 range. It has been a multibagger. It is arguably the third largest rice exporter and they have diversified their field, from rice exports to munchies. If you go on an IndiGo flight, the munchies which you get are all products from LT Foods. So, they have diversified their portfolio. They have done some overseas acquisitions and even though the margins remain low, food security means that rice as a product will continue to see much more traction. They are one of the best performing stocks as far as the basket of food security goes, but their lineage lies in the new products which they have launched. So, next time when you fly IndiGo, the munchies that come will be from LT Foods.

What’s the outlook when it comes to the favoured defence and railway basket? How are you reading into these stocks in an environment like this?
Sanjiv Bhasin: I think you can start to nibble into those sectors, but if you want to buy anything in PSUs, we are more bullish on oil marketing companies and the power financers. IOC, BPCL fell after a price cut of Rs 2. It will be made up right after the elections and I think their refining margins may come at the highest ever in the history of the company. So, use this decline to add IOC, HPCL – two stocks we are very bullish on and this could be a heaven-sent opportunity that this Rs 2 cut is being taken negatively.

Both the MDs have come on record that this is not going to affect their profitability at all. In fact, they are saying that pricing freedom is there. Their other ancillary products are doing very well. Among other players, there is REC, PFC . We saw a record dividend from REC yesterday. The solar panel, wind energy, the whole basket is doing extremely well. The recovery from the state electricity board is at the highest in the history of the country. REC, PFC are now, even on dividend yield looking extremely positive. So, I would go with this basket.

One can nibble into Hindustan Aeronautics and BEL, but I would say there the execution will take time. OMCs and power financers are in a very sweet spot on lower cost, higher NIMs and higher refining margins which I think will be evident in the coming quarters.