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Do SIP for next 8 weeks; after Oct, expect surge in midcaps: Sanjiv Bhasin

| August 22 2019 10 : 10 IST | The Economic Times

All the despondency and cleansing out process is getting through and after October, you will see a rejuvenated midcap index and midcap stocks, says Sanjiv Bhasin, Executive VP-Markets & Corporate Affairs, IIFL Securities.
 

Should one just sit tight with positions even in the beleaguered mid and smallcap stocks that have had investors burning their fingers quite significantly?
Correct. That is where the real beta will be generated. I have not seen such despondency and capitulation in midcaps in a long time and I have been there in the market fairly long. I think all the despondency and cleansing out process is getting through and after October, you will see a rejuvenated midcap index and midcap stocks. I do not rule out 2020 belonging just to midcaps and you could see stocks double, triple from here. I can stick my neck out. Midcaps are overdone on a lot of things and now they can only get better but keep your conviction ideas and do a SIP for the next eight weeks. I cannot control the volatility but I assure you after October you will see a very strong surge in the midcaps. 

If you try and pick up a few things right now what would they be? Where do you still see steady returns going forward?
I can name some stocks which we have been doing a SIP for 12 weeks and they are both large and midcaps and top of the line would be Reliance, UltraTech, IndusInd Bank, L&T, Sun Pharma, Maruti and a Mahindra & Mahindra. In the midcaps, Lupin, Ambuja Cement, Nestle and Ashok Leyland, IDFC First and LIC Housing should relatively outperform on all parameters.

They are a mix of a lot of the beaten down sectors like auto, some of the contrarian plays like pharma and some of the sunshine sectors like cement, paints and speciality chemicals. But if you cannot more then just stay put, then this is not the time to sell. If you can prudently start to get a SIP, then do it for the next eight weeks you will be pleasantly surprised once we are through the middle of October. 

When it came to CG Power, the risk and audit committee has flagged off some concerns saying that the advances to related and unrelated parties have been understated. The company is yet to respond. How much of a concern or an overhang is this going to be?
What has happened is that now even rating agencies, auditors are running out when the ship is starting to sink. So, a large part of it is already in the price. At Rs 18, you had hardly any succour on the downside. We know the promoter is overleveraged and that some of their Belgium and the European assets are up for sale. Now the slowdown in Europe may have delayed that and that could be the silver lining.


Auditors like to keep their slates clean. As was the case with IL&FS auditors, now everyone is waking up and sounding alarm as stocks have fallen 90%. I would not comment too much on the stock. I think once they sell their assets and reduce their debt, that would be the only silver lining. How long that takes, we will know more from the management on that. 

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