Diwali onwards, the next bull market starts: Sanjiv Bhasin

What are the three options -- sit on cash, keep waiting for when that decline may come or just invest systematically? Stocks have fallen a fair bit and should one find opportunities within that and buy right away?
We have been one of the few contrarians in the last two months. We told everyone, do a SIP for the next 12 weeks. The 12 weeks finished on 15th of October and lo and behold, the markets are up almost 1,000 points. We think that this is the lull before the storm. Anybody who tells you he can time it, is either a fool or a liar. So staying invested is the only key and you cannot time the market on your precise bias. We think the broader market will tend to outperform after this Diwali.

Like I said, closer to 12,000 on Diwali is where we keep our target and we think the next bull market starts from this Diwali onwards. We are also of the view that midcap decimation may be coming to an end and that is where the real money lies, as all the imponderables get priced in.

You are looking for a rate cut by RBI. The Fed is now going to be extremely dovish. There is talk of a stimulus and so equities as an asset class cannot go wrong. All slowdown factors are now getting priced in. Look at the positives from the government side. We will take it from there.

There has been a lot of wealth erosion for shareholders by a number of real estate companies. It is a clear case of the men versus the boys within this space. Where are you finding comfort or is it an avoid for you on the real estate basket?
You have already seen the distinction between men and the boys. Godrej Property (a disclosure we own it) can only gather more market share. It has got a unique business model and it is ready to put its money where its mouth is.

Secondly, people want completion, they want credible names and price is not the matter. So Godrej Property, Prestige and Sobha and if you can take a little bit of risk, then DLF which is now in the transitioning phase of clearing all the past baggage. They have transitioned themselves on infusion of more capital.

DLF has the largest rental income, Rs 2,500-3,000 crore with the overhang of leverage now getting out of the way. Return on equity can improve very smartly. Sum of parts is at Rs 150, the risk reward is very favourable for a 30% upside. We also think that come 2020, real estate should start to do very well given that we are in a very positive mind on equity and sooner rather than later, money will chase fixed assets as in realty.

Among private banks,should one buy Yes Bank, RBL, or ICICI Bank?
I will take the last two ICICI and RBL. ICICI has clearly been an outperformer on the back of the fact that they have cleansed their book, their asset quality is improving, their retail book is expanding. RBL is at Rs 300, which is an extremely positive price to buy the stock, given that the overhang has definitely been decimated.

They had already cautioned for some accounts which they said are not even coming to that climax of an NPA. The valuation comfort on an RBL, given its franchise increasing and it is now book slowly getting away from the SME to the retail side, should be in good shape. I can also add one of the banks which has been beaten more than normal. We have a buy on IDFC First. I think Mr Vaidyanathan already sounded out that his book is now going to be a retail book in the next three years and he is slowly converting all the book from MSME to retail. Most of the provisioning for weak assets are product of the bygones and going forward their CASA ratio improvement, improvement in NIMs will make that to be one of the best banks to own with a two-year view.

What would you want to hear from the RBI governor in his commentary today?
He has already said that he wants the pass on the effect of the rate cuts. Most banks have now adjusted to the MCLR. I am very sure that he will be able to give you more colour on how the pass through effect and the mistrust with NBFC gets eradicated. That will see the real end users getting the benefit of low cost and that should be the prerogative of the RBI.

We have to see that the transition effect and the mistrust is done away with. I would be looking for that. But take it with a pinch of salt. The yields are now at a three-year low and going forward, I see no reason where inflation or yields should be on the rise. Oil is benign. There is no inflation globally and locally. Thirdly, all the parameters point towards lower yields which for India?s sake would be a very big plus for the government. For the fixed income people, it is about time that equity starts to become the preferred choice of investment in the near future.