Sanjiv Bhasin | Sanjiv Bhasin portfolio: Dollar weakness is here to stay; get into a bucket of metal stocks: Sanjiv Bhasin

Sanjiv Bhasin, Director, IIFL Securities, says “both ferrous, non-ferrous metals are looking very good. So buy a basket of stocks which include JSW Steel, Jindal, Tata Steel, not to mention that SAIL has gone into three figures, and could head towards Rs 125. Please add Hindalco as a play over there, because Novelis is performing brilliantly. A basket of stocks will do well.” Going by last week’s data, the case is being made that now maybe more allocation to largecaps can be preferred given the muted move that we have witnessed within the broader universe. Your views?
Well, that seems to be the key. And, when foreign money returns in the ETF flow or in direct investment, it will always chase the largecaps. We have had a large underperformance as far as Bank Nifty or the heavyweights, particularly HDFC and Reliance are concerned and there is a catch-up trade there. So Nifty or the Bank Nifty will be more constituent in an upside and midcaps could take a small breather but the market breadth is telling you something else.

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So if there is money on the table as we discount these events, the midcaps will be market performers, if not outperformers. So yes, largecap banks are looking extremely good and select stocks in the PSU basket also deserve attention.

It is a case-by-case story within individual stocks, but for those who are in the money and that is pretty much everyone when it comes to mid and smallcaps, would you say stay put or book profits?
So a few clients called me a few days back and they were thanking me for the move in GMR from 35 to 60. And then they said two days back that they booked profits and they lost out on the last 15%. So I do not know the last 15% when it comes. You know, GMR jumped 15% in a day and I think that the last mile recovery is still there. So stay put, book a bit of profit, get into largecaps. There is nothing called sitting on cash because this is a bull market. You will have enough opportunities maybe coming your way but you have to see where you can deploy your cash.

I still think select pockets are going to be outperforming, but in the broader universe, I would still put money on the largecaps because I would be getting more assurance on earnings, price multiples and safety of any correction. In the next correction, midcaps will have a faster leg than the largecaps.

Let’s discuss GMR Airports. Given their newest investment by GQG, which is famous for catching stocks and companies at their bottom most, is it still a buy even after the jump it has had last week?
I used to tell everyone to look at the rush in airports. You will see that you do not have a place to stand and people used to take that in a lighter way. Well, it is up and running at 70. Also, Aerocity is booked to the hilt. There are no rooms available. Hotels and weddings go in sync. And the airline business is doing the best it is ever. Indigo hit all-time highs and so on. I still think there is juice in the upside, but a large part of it may be now because these types of large players when they come, do make a top for the time being.

We have seen a similar chase in IDFC First Bank and so on. But let me tell you, GQG is laughing his way to the bank because they had the courage to buy Adani stocks when there was no buyer. And that is why when they are laughing their way to the bank. The risk making will be even more. So you do your own gauge on your risk taking capacity, but I still think GMR may scale 85 over a period of time. However, it is a caveat that if you have those stocks, please book some profit also because these are volatile infrastructure stocks, dependent on a lot of moves. And this last move has caught everyone by surprise.

From a stock market perspective, what is the view on the likes of JSW, Tata Steel, JSPL, etc.?
Correct and this is now going to be an outperforming sector since we realise that the dollar weakness is here to stay. And I see no recovery. I would say the dollar is going to double digits over a period of time which means the combined effect of the China comeback and steel production at a high, plus the infrastructure story in India means steel is going to be a very key conduit. In fact, all ferrous, non-ferrous metals are looking very good. So buy a basket of stocks which include JSW Steel, Jindal, Tata Steel, not to mention that SAIL has gone into three figures, and that could head towards 125. And please add a Hindalco as a play over there, because Novelis is performing brilliantly. So a basket of stocks will do well. We, as a disclosure, have Jindal Steel and JSW in our portfolio.

Why Jindal Steel and JSW? Why not Tata Steel or SAIL?
We thought that these are better outperformers as far as numbers go. And they were showing you more traction on their margins. JSW, as you know, is the best integrated play in the country. Jindal has reduced debt substantially. So return on equity became very important. I am not doubting Tata Steel or SAIL. But as a preferred choice, we thought these are two stocks or two corporates which can be outperformers.

You are now tactically moving higher allocation and fresh buys towards largecaps. Give us three other names, other than what we have talked about, where one can buy still?
I still think UltraTech is headed to Rs 11,000. I would say that the whole gamut of GAIL, the city gas distribution companies. I am very bullish on MGL, on Gujarat Gas. These are two names which we like. We like GAIL in that space. Not to forget, in this commodity space, Hindalco is one stock which has already scaled new highs. The ferrous, non-ferrous business, both on the copper smelting part, where the treatment charges, refining charges may be at the highest. And plus, Novelis has been an outperformer. So these are five-six names which we think can be outperformers.

You have talked about your preference towards largecap banks but within the smaller ones list, would RBL feature in there?
Yes, yes, 100% and I told you earlier that if there was one midcap bank I would buy in this correction when the RBI move came, it would be RBL. We own it in our portfolio. RBL has no stake more than 1.5% and Mahindra comes and buys 4%. This bank is going to be an outperformer on the sheer weight that there is no strategic ownership now.

Mahindra, whatever they may say, there is a strategic interest of upping their stake in financials and the best conduit could be a bank which has actually no stake over there. RBL’s earnings have improved. The new chairmanship of the SBI person has done exceptionally well. And I think the present management, their focus on the NBFC side has been huge. Their finance arm has opened more outlets in the last year than in the last five years, which is telling us that their credit expansion or their book and NIMs will be very-very strong. So I would say this is headed for Rs 350. A disclosure, this is in both my personal portfolio and in our client portfolio.

There was a lot of news around the sugar sector last week and clearly the government is pouring cold water on sugar mills’ ethanol dreams. At least that seems to be the understanding as of now. What do you do now? Book out or buy into the decline because this seems like a temporary move? Ethanol is not going anywhere and sugar stocks will be beneficiaries?
Correct. So the issue right now is there is a lot on the table and one can choose between other things which have more transparency, more earning visibility, and where there is more space on the upside. Sugar has been a big outperformer. I know for a certainty that the molasses or the baggies part of sugar which is left out of the blending, is being lapped up for more industrial use and so on.

So in the end, Balrampur is one of the biggest blue chips and it will find some buying support. But in the meantime, people would prefer to get into largecap banks and other stocks which have not done much. So there is a rotation going on. I would still say if you have the sugar stocks, stay put and buy only when the consolidation ends or do a systematic shift and try to add some of the big names, particularly EID Parry, DCM Shriram, and Balrampur Chini.


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