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Santa rally is coming! Invest with a long-term view: Sanjiv Bhasin, IIFL Securities

Mumbai | December 13 2018 14 : 06 IST | The Economic Times

In a lighter note, let's say Balle-Balle and let us hope Balle-Balle become triple. It has left all the bears on the side. There was a double whammy of state elections loss for the ruling BJP-led NDA government and a change of guard at the RBI. But there appears to be a Santa rally as we come closer to Christmas! 

Largecaps like L&T, Eicher Motors, Axis Bank & Hindalco and midcaps including Indiabull Housing, MGL, CG Power and Ashok Leyland are doing well, Sanjiv Bhasin, Executive VP-Markets & Corporate Affairs, IIFL Securities, tells ET Now.

Edited excerpts:

Can the momentum continue for the markets?

In a lighter note, let's say Balle-Balle and let us hope Balle-Balle become triple. It has left all the bears on the side. There was a double whammy of state elections loss for the ruling BJP-led NDA government and a change of guard at the RBI. But there appears to be a Santa rally as we come closer to Christmas! 

Most of the event calendar appears to be over except for a Fed rate hike. But even the Fed sounds dovish. I would expect the global rally going into the new year and as I said, this time the Santa rally is coming closer to Christmas. 

The other notable change is the change of guard at the RBI with the new Governor sounding extremely positive on infusing cash. The IPP numbers, the bond yields, in the inflation data, all tell us that the market performer for this month should be midcaps -- particularly some of the NBFCs, banks and interest rate sensitives. 

Where are the opportunities where one could still invest and make money in this market?

There are two points. One, do not try and time the market. We are in a huge bull market, particularly in the Indian context. Retail flows have been the backbone of this market and they continue to be outperformers. Retail investor is not showing his back to the door. He is more positive on declines which is evident from the data on SIPs on a monthly basis. 

Secondly, do not look for the next three months because there will be an election in the next four months which may add to the volatility. Look at the next three years -- base effect of earnings, macros on the positive in the shape of oil, bond yields and a very positive momentum from the incoming government. 

Thirdly, India’s price-earning multiple will remain elevated because of the local flows which have been the biggest change of guard in the last two years of financialization of saving. 

Four-five good names in the largecap space would include a) L&T, which we think can be an outperformer on the back expansion in capital goods sector; b) Eicher Motor, where again the brand value and the resumption of positive data on interest rates easing for autos would be a big point; c) Axis Bank, where banking structure is leading from the front; and d) a metal play like Hindalco. The risk reward is extremely favourable in Hindalco. Globally, Novelis is outperforming and metal prices both copper and alumina are headed higher. 

Coming to midcaps, Indiabull Housing is a beta play, given that most of the weakness on the recent change of events and the NBFC lending is over. We would look at CG Power which is very positive as they are divesting some of their Belgian and European assets. 

We would again be very positive on Dabur given that we think in the FMCG basket. Resumption of consumption spending would be very positive and among gas utilities, MGL has underperformed but is set now to outperform, at least in the near three months. 

Which is at the top of your list of midcaps this morning?

Indiabull Housing, MGL, CG Power and Ashok Leyland. The risk reward is extremely favourable and you have seen a quarter of hiatus because of the slowdown in NBFCs and the cost of funding. That is going to ease now. The businesses are doing well one should not look at the next three months. If one can look slightly longer term, then India becomes one of the best emerging market destinations. 
The other double positive would be that a Santa rally is coming now much closer to Christmas. I am definitely seeing midcap outperformance and these stocks would be outperformers. As a disclosure we have had a buy on these stocks so you could take it that with a pinch of salt. 

How would you look at Reliance Industries in the wake of the Jio story and what they are doing with regards to restructuring some of the telecom related assets into separate companies? 
Not only eliance, I think pricing is coming back and Jio would definitely benefit. A disclosure. we have a buy on Bharti under Rs 285-290. We think the present trend of politics or the elections will unleash the largest consumption of data on social media and that means all the incumbents should be laughing their way to the bank given that pricing is back. Pricing is going to come back in this quarter and the volumes will both benefit. So for Jio and Bharti that would be win-win. 

For Reliance itself, given that some of the other businesses particularly are looking to divest shale gas which is getting a higher multiple, they are stabilising on their petchem and their GRMs which should be regular run businesses. Reliance will continue to be an outperformer in the large energy pack and all declines should be used to buy. 

Source: https://economictimes.indiatimes.com/markets/expert-view/santa-rally-is-coming-invest-with-a-long-term-view-sanjiv-bhasin-iifl-securities/articleshow/67072055.cms

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