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Money will be made in these 5 bank stocks in next 1 year: Sanjiv Bhasin, IIFL Securities

Mumbai | October 31 2019 09 : 41 IST | The Economic Times

Money will be made in DCB, Federal Bank, IDFC First and two PSUs – PNB and Bank of Baroda in next one year, I am very sure that in the first 10 days of November, Nifty will hit 12,000. The real delta will be created in the next 10-12 months, says Sanjiv Bhasin, Executive VP, IIFL Securities. 

Where should we start -- Reliance, Tata Motors, a couple of heavy hitters in action today?
It tells you that corporate India is doing extremely well on the side where it is the brick and mortar companies. When have you last seen State Bank, ICICI, Reliance and Tata Motors along with Tata Steel steal the thunder? So it tells us that pessimism was at its highest, fear was overblown and in two months lo and behold, we are closer to 12,000. I am very sure that in the first 10 days of November, you will hit 12,000, but it is the broader market outperformance which in the last two weeks has given us enough support. So, the real delta will be created in the next 10-12 months. I am extremely positive on the broader market and yes, the select largecaps which are leading, are the ones which were always bearing the brunt for whatever reason. It is back to the diehards of Reliance, Lever, Tata Motor and Tata Steel.

How would you read into markets being so polarised? A certain end of the markets is hitting a 52-week high, but some of the others are looking very depressed?

That is the nature of the beast. Everyone wants to hide in 30 stocks. Everyone wants to buy the broader market but does not have the wherewithal to come on TV and say that. I can stick my neck out. The broader market is extremely attractive. Do not look at the next three-six months but look till you make at least 50% to 100% gain in select stocks or sectors because there is going to be huge amount of risk taking given the global environment where equities have been underperforming. Here, we have lower rates, higher risk and no attractiveness in bond yields.

SIPs and mutual funds inflow into midcaps will be the real undoing in 2020. I do not rule out a repeat of 2017 and beyond in select midcaps given the low base effect. Earnings is just round the corners given the strong impetus of corporate rate tax and a lot of consumption freebies being announced by the government and so on. So capex and construction will be the real game changer. I am putting my money where my mouth is - on select midcaps across the board.

Do you believe overall midcap as a basket will tend to do well with the sort of underperformance you have seen in the last 18-19 months?
Not 18-19 months in my 30 years I have not seen such despondency and capitulation on market cap in midcaps. If I could just take one name, it would be the CPSE ETF. PSU banks are available for a song and if you really do get this strategic disinvestment in Concor and BPCL, it will set the cat amongst the pigeons. I would definitely recommend to investors, keep your SIP in CPSE ETF. As an instrument, it will do wonders.

On midcaps like I said it is the five Cs – cement, construction, capex, consumer and corporate banks. In that, look for midcaps which are relatively stable, good names where one quarter hiatus may be seeing a lot of downside. I would say there will be similar amount of upside and more in the next three to six months.

So like I said, the CPSE ETF is a very good instrument. The whole basket is looking extremely value accretive given dividend yields and given the share decimation of market cap.

What did you make of the banking earning?
Better than expected. Corporate banks have really outperformed whether State Bank, ICICI or even Axis. Axis numbers were way ahead and I am actually putting my money on more on the midcap banks where I think the numbers were fine.

If I could stick my neck out, five banks where I think a lot of money will be made in the next one year would be DCB, Federal Bank, IDFC First and two of the PSUs – PNB and Bank of Baroda. I think they will come out with relatively steady numbers and the credit expansion because of the fiasco of NBFCs is going to see a lot of renewed credit expansion for these banks. So I would be more bullish on the midcaps though as an ownership we have all those three banks – State Bank, Axis and ICICI as our top corporate banks going into 2020.

What about Reliance Industries?
Stay put with whatever you have invested, I know the midcaps have been the horror story in the last three years but there can be a bad tiding because of extraneous reasons. Reliance has been the real cherry on the cake and it continues to be so. We have a target of Rs 1650. A disclosure, it has been one of our top largecap picks. We are not adding positions but we are saying stay the course with your broader market because in the next three months, we will start to see outperformance on the broader markets.

In the short run the foreign buying or the mutual fund flows will be directed towards 20-30 stocks but we think the broader market is now ripe for a huge outperformance and 2020 is really where you will see a lot of money coming back on the table in the midcaps.

Reliance continues to be an outperformer and if you have it please hold it, adding on would be a little precarious at these prices but the broader indices if you own midcap stocks just stay put because they can be in for a huge outperformance in the next one year.

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