There are a lot of block deal actions on D Street. Axis Bank, Gland Pharma, Shilpa Medicare what have you, all are in the spotlight. What do you make of it?
Sanjiv Bhasin: Big block deals and a plethora of new issues is typically the sign of a bull market reaching some sort of a crescendo. It is not that there is a near-term top, but it is telling us that exits and entries are at full flows and particularly in some of the longer-term private equity or equity with money which had entered about two years back and now are seeing very bright exit opportunities.
Bain Capital came into Axis when it was closer to Rs 450-500 and when a change of guard was evident with a handover from Shikha Sharma. I think the bank has more than doubled from there. Like we said it is a glass half full half empty. It indicates the left out feeling where people are looking for excellent stocks to pick and an exit for old people who have been holding and now want to encash as the bull market reaches a crescendo. So let’s be a little watchful here. I would say some of the largecaps are still looking attractive, but it is time to be a little cautious because the market looks overstretched on all parameters.
Where can investors find a buying opportunity and where is the market looking toppish like you just highlighted.
Sanjiv Bhasin: The buying opportunity continues to be stock specific ways and some of the PSUs have outperformed, particularly as a result of the China effect yesterday on iron ore or caustic soda or specialty chemicals which are making a comeback and in turn we will see effect on the Indian side.
UPL has been one of our top picks which we think is a very good relative play. It is just trading at one time price to book. It is the largest specialty chemical player in India and one of the largest in the world. They have already indicated their divestment in the sense that they want to encash part of their Advanta stake which is valued at something like $9 billion and that could be a very positive way in reducing your debt structure because return on equity will improve.
Secondly, the crop seeds business particularly sunflower, corn, canola is seeing an uptick in prices. At Rs 485-490, UPL is very skewed towards an upside. I do not rule out Rs 650 levels coming in the next one year or maybe end of this year and this would be a perfect buy. Second would be GAIL which is poised to come out with very good numbers and we have seen gas prices and the distribution flow getting very strong. GAIL would be my top pick but be cautious that it is at a 52-week all-time high in nearby, but I still think there is a 10% upside there.Lastly the third name would be Indiabulls Real Estate which is a grossly undervalued stock and now with capital infusion coming in from the likes of Embassy, Blackstone and Poonawalla, we have very marquee names. Rs 4,000 crore has been committed by very marquee names and it tells you that the land bank which they own is all owned by them. I think this stock is due for a re-rating. It has moved sharply from Rs 110 to Rs 138, 140 but I still think this stock by the end of the year can hit Rs 250 easily. So, these are two-three marquee names. Rest, we would be little cautious on the index over here because the weight of Reliance and L&T and maybe a couple of stocks is seeing that the ETF inflow is now nearing a crescendo.
What is going on within the entire banking space because while the Q4 updates have been fairly healthy, it does not seem like anything is incrementally wrong. They have not quite been participating in this largecap-led rally that we have witnessed. What is your take?
Sanjiv Bhasin: Correct and that was more to do with the weightage of HDFC Bank and the underperformance. Private banks are starting to perform and I have been of the view that one should take some money off the PSUs and get into private banks.
I still think HDFC, ICICI, Axis, Kotak are going to lead from the front and if anything, the Bank Nifty has to go to 50,000. But look at some smaller names, RBL Bank, Dhanlaxmi Bank and some of the mid and smallcap banks are looking very attractive. Their numbers, their credit deposit ratio, low rates, all these are going to add up to positive numbers. If anything, the guidance from HDFC Bank has been positive as far as reduction in credit deposit ratio and we know that the inflows into equity,
SIPs and mutual funds has been a cause of concern on the liability side. But now with the credit expanding, the bank’s credit offtakes have been very strong. I think private banks could come out with stellar numbers. So, overweight banks, particularly the largecap private and select midcap banks.
What did you do with your Paytm holding eventually? Still holding on?
Sanjiv Bhasin: No. As a disclosure, we have exited Paytm because we thought that the underperformance might continue. We got the opportunity, we exited Paytm, we have exited Zee also. These have been two of the weak calls and we wanted to get into better plays because this underperformance might stay for a longer than expected period and who wants to fight uncertainty in a bull market? If they cannot perform at 22,500, then God forbid, if we hit 20,000, we will be in the doldrums. So, if you have a slightly longer-term view, it is better to get into more marquee names, which we have done in the recent month.