Expect up to 400-pt upside in Nifty in November: Sanjiv Bhasin, IIFL Securities

Mumbai | November 14 2018 19 : 50 IST | The Economic Times

It is not only crude, it is the bond yield, inflation number, IIP number and the rupee as well. I do not rule out a 400-point upside.

Bank Nifty can outperform from here and a lot of other sectors which have pleasantly surprised on the earnings front can lead from the front, Sanjiv Bhasin, Executive VP-Markets & Corporate Affairs, IIFL Securities, tells ET Now.

Edited excerpts:

What kind of a boost can sentiment get on account of crude tumbling to $65 to a barrel?

It is not only crude, it is the bond yield, inflation number, IIP number and the rupee as well. I do not rule out a 400-point upside. A 10,800 to 11,000 on the Nifty could be on the cards. But more than that, Bank Nifty can outperform from here and we should see a lot of other sectors which have pleasantly surprised on the earnings front like insurance, speciality chemicals and metals which can lead from the front. 

Tata Steel has come out with an EBITDA of Rs 20,000 per ton. It tells you that the commodity market is extremely strong. So like I said, 10800 to 11000 in November is very much on the cards. 

If food inflation remains low, what will that do to the agrarian demand and agrarian spending?

It is telling us that the rural side is hardly affected by what has happened with the NBFCs. The entrenchment of banks like the State Bank of India, in far reaching sectors is seeing credit is expanding. Look at the credit expansion numbers from most of the retail banks. The MSP hike and some of the GST changes should bode well for agrarian spending. 

On the other hand, MSP in commodities could see an uptick in food inflation going forward but it will be countered by the sharp fall in crude which could mean that there will be more spending power for the end consumer, the auto users and so on. All in all, the sharp fall in crude is only going to bode good for Indian stock markets, bonds, the government, the fiscal, you name it. 

Would you buy Tata Steel or a Zee? They both are news driven. 

The Zee move is very prudent. It tells you that the managements are very proactive with the changing times and just as Reliance is becoming a technology company now from an energy company, Zee is also on its way to transform from a media into a technology company. 

The owners own 42% in the company which roughly works out to 17,000 and if the sell 50%, they would be looking to encash that and look at the game forward. It is a very positive move. I think there will be also an open offer. That stock could at least see a 10% upside in the minimum term. 

Coming to Tata Steel, it has been one of our top sector favourites. It is Tata Steel, JSW and SAIL in that pecking order. We are very bullish on Hindalco. These four will continue to hog the limelight. Tata Steel numbers are telling you that some of the overseas businesses and the amalgamation of Bhushan Steel may be playing out very well. Margins, EBITDA per ton are the highest ever. It tells you that once the ThyssenKrupp imbroglio is sorted out, Tata Steel could again see another 50% upside. We have a target of Rs 750 in the next one year on Tata Steel. 

What is your take on Ashok Leyland transition?

In the face of it, it seems to be standard and the numbers were in line, slightly disappointing on the volume front but that was to be expected. This continues to be the blessed CV player. The bus volumes could all add up. So, on decline or even now would be a good opportunity to buy this stock. 

You have to be slightly contrarian in the auto sector. Just as we stuck our neck out and gave a buy on Maruti closer to Rs 6,700 over an Eicher at Rs 20,000, this could be the worst quarter for ALL with maybe one more going ahead. These stocks will definitely outperform on the consumption side. So yes, Ashok Leyland on any decline would be a buy and the change of guard would be transitionary. As soon as you get a better name, you would see the stock react upside. 

NBCC was a high conviction idea. Is it time to revisit the order book thesis because execution seems to be a problem?

Yes, it has been a frustrating year but I have a lot of conviction. They have already got clearance for six of the colonies except Nauroji Nagar and they are just awaiting for a clearance from the environment ministry. 

Given the whole imbroglio on the NBFC/IL&FS fiasco, a large part of the un-built orders should be now only accruing to NBCC. Plus, there is talk that railways are going to develop large tracts of land and all that summingly goes back to NBCC. 

If you are looking for a pan India play for the next three, five years on construction and expansion on all the sides from real estate to commercial, you cannot go wrong with NBCC. The valuations are extremely attractive and we have a target of Rs 130 in the next one year. This has been one of our picks from Rs 80 downwards and we still continue to have conviction in this. 

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