Sanjiv Bhasin, Director, IIFL Securities, says “the next few days, weeks, months belong to banks. We think the proxy play of weaker dollar, weaker bond yields is playing out exceptionally well and banks are going to lead the market. So Bank Nifty is where you should be putting your money right now. Some of the midcap small banks are now going to be in action because RBI itself will be in a mode of following the Fed over a period of time. Along with HDFC Bank, my top picks are AU Bank, Dhanlaxmi Bank and DCB Bank, where promoters have upped their stake. Bank Nifty is headed to 50,000.”
A 15% knock on MGL alone. Do you think that this is perhaps a good dip to buy into any of these names?
Sanjiv Bhasin: You said a 15% dip, but you did not say that in the last four months, it was up 50%. So yes, now you are aware of some government intervention, the price of gas falling sharply overseas, which means ONGC’s subsidy account will get smaller. I would rather be with an ONGC. City Gas has had a very, very sweet run and we will need more clarification, there cannot be smoke without fire.
So there must have been some event or diktat which can curtail profitability. MGL has had a dream run along with Gujarat Gas, because in their respective areas, there is no competitor. And we think that maybe the prices have run far in excess. In the midcap or the semi-midcaps, there was a large amount of froth which is now being corrected. So irrational selloffs will be part and parcel of that.
But we are saying ONGC will be the biggest beneficiary purely because gas prices have fallen and now there is no subsidy to pass on for gas. They are the suppliers to city gas distribution. So ONGC would be a top pick over there.
However, the next few days, weeks, months belong to banks. I have been saying that private banks are about to make a move and yesterday was the day of the private banks making a comeback. So we are very bullish on banks. We think the proxy play of weaker dollar, weaker bond yields is playing out exceptionally well and banks are going to lead the market. So Bank Nifty is where you should be putting your money right now.
But would you say stick it out with ICICI Bank or would you say it could be a bigger bottom-up move, say in a Kotak or in an HDFC Bank? Sanjiv Bhasin: They all will participate. We are aware of the overhang of HDFC that has reduced quite a bit because of the sell-off. And now I think levels of ownership have come down sharply. The smart money has definitely bought that dip. And if anything now, it has to be HDFC. So if you are saying 50,000 is coming on Bank Nifty, then HDFC has to be the prima donna. But do not forget the other banks also.
We think some of the midcap small banks are now going to be in action because RBI itself will be in a mode of following the Fed over a period of time. Yields are low. Inflation is lower. So two banks, which along with HDFC are my top picks, are AU Bank in the largecaps and Dhanlaxmi Bank and DCB Bank, where promoters have upped their stake. They have enough comfort. They can be very sweet players once the liability franchise evens out. But Bank Nifty is headed to 50,000 which is evident from the largecap private banks just starting to participate.
Let us talk about the stark underperformance that we have witnessed within the entire FMCG basket at least on a year-to-date basis there has been a decline of nearly 6% lots of factors attributed to that but do you believe that this is an interesting opportunity to buy into some of these counters so that the weakness is only going to continue?
Sanjiv Bhasin: I think it is a buying opportunity. The worst of the numbers are priced in. You are looking at lower input cost and revival of demand. I have never seen the type of spending which has just started whether it is high scale entertainment, travel, tourism and now it will spread to the staple side also. Two stocks which we are very bullish on are Bata and Patanjali.
They can be huge outperformers once we get closer to elections and so on. These companies which are more into the distribution mode will have a very, very good outlook on the rural India part. FMCG will participate. But right now, I would say it is all about banks.
We have seen the rotation of money. But largecap banks, particularly the private ones, are raring to go. Gold has hit a new high along with Bitcoin and. That means the likes of Muthoot, Manappuram get more market share. With asset prices at a new high, their numbers will be very, very stellar in the coming quarters.
