Optimistic about market turning from Tuesday; 3 must-haves in portfolio now: Sanjiv Bhasin

Tech Mahindra, SRF and IOC are the three must-haves in a portfolio now. Tech Mahindra could be giving the opportunity maybe this year and next year. They have guided on the upside. It would be my top pick. Second would be SRF. In fluorine chemicals, there is no other player pan Asia which has got such a big presence. Oil refiners have been through the worst. IOC would be my top pick over there, says Sanjiv Bhasin, Director, IIFL Securities.

On the current state of the market
We knew that we were headed for a correction in the market and that is very healthy. It separates the men from the boys but I think it will be short lived.

Could it be routine profit-taking as there was a one-way move up, making it the best performer in the world?
More than that, the most hated stocks like PSUs have almost doubled and tripled. Give it a break and take it with the pinch of salt that there will be profit-booking but the left out feeling is humongous. I travel all over India and I know that you cannot but make money now if you do not buy this fear. Also, we are headed into Christmas and the holidays. Give it a couple of days. By Tuesday, the market will be up and running.

Why don’t you give some interesting stock recommendations?
The broader market may be telling you that a lot of froth had been built in, the cost of carry was high but all that is now done with. I will take two largecap stocks which can fit the bill. The first would be Tech Mahindra. We know technology has been the worst hit because of this slowdown and the advent of higher rates.

But take it with a pinch of salt. The Fed cannot have it both ways. On one hand, retail sales are at a three-year low and people are talking of a recession. On one hand, we are going on pressing the gun. So credibility is at risk. Tech Mahindra could be giving the opportunity maybe this year and next year. They have guided on the upside. Technology spending is very strong on the outsourcing side.

Tech Mahindra on the BFSI side, as their relationship with BT trades at half the multiple of Infosys or Wipro. If you are looking for value and opportunity, at Rs 1,025, you cannot but make money in Tech Mahindra and that would be my top pick.

Second would be Shri Ram Fibres. In fluorine chemicals, there is no other player pan Asia which has got such a big presence. In specialty chemicals, in plastics, they are ruling the roost but there has been a couple of quarters because of high input cost. You have got crude roughly correcting almost 20%. Any crude derivative which corrects, is a win-win for the specialty chemicals. SRF is a perfect picture over here and at Rs 2,330-2,340 you must add that to your portfolio.

Thirdly, I would say oil refiners have been through the worst. IOC would be my top pick over there. We will discuss more things but Tech Mahindra, SRF and IOC are must-haves in your portfolio.

If the market were to correct further, even if not at the current levels, these three are your top buys?
Do not wait for Monday to start putting your money. By Monday or Tuesday, this market will reverse and then we will again be caught after 200 points on the Nifty and irrespective of the Nifty being oversold, these are key levels. I am not making a case of being a very big outperformer but we have corrected more than what was rationally thought of,

There is enough underpinnings to correlate India’s outlier again. Let us take it. Crude is weak, the dollar is not showing any strength and by this weekend, we would have evened out a lot of the Fed factoring and so on. I would be very optimistic about the market turning from Tuesday.

You were talking about how PSU banks were the most under-owned, beaten down space. They have made a comeback this year. Who would have thought that these stocks would do what they have? What happens going forward from here? Do you stay invested if you have positions in PSU banks, do you book out, what do you do?
If you have been there and have doubled and tripled, there is a lot of froth because when the likes of JP Morgan and all come out with targets, you take it with a pinch of salt. These were the first ones who created these so-called villains but on a lighter note, I still think PSUs are very well capitalised.

In power, infrastructure, coal, mining – there have been write-backs. The steel industry has returned capital. PSUs have done well. The credit cycle is strong. The SBI chairman says that in the last quarter, we have done 32 lakh cars. That is humongous and they are talking of a very, very strong housing market. They have made their presence everywhere.

Also, an additional thought to ponder is that pensions are now going to be limited. Also because of digitalisation and everyone having fintech, burden of extra wage pressure also starts to come into play. The next two years belong to them. Yes, there is going to be a much needed correction which is taking place. If you think these stocks are now trading at 0.5-0.7 times price to book, I still think one time price to book for some of them like State Bank can go even more.

So those who have FOMO are thinking of making a fresh entry, should they stick with SBI?
Correct, stick with SBI, BoB, Can Bank on the largecaps. As a disclosure, we were very bullish on PNB and Union Bank. That has more than doubled. We have taken some chips off the table but we still think there is room and one can continue to grow in the credit splurge which is going to take place.

Just to tell you, the Indian Hotel chairman says that in 2023, nothing has started. Last year, at Rs 140, it was my top Diwali pick. Even I did not visualise Indian Hotel at Rs 340. India is an outlier due to our demographics. No rooms are available. We had to cancel our Goa event and I can go on.

And if they are available, it is at frightfully high prices?
I went to Benaras. The Taj Ganges was Rs 35,000 a night and there was no room available.

IHCL is your pick this year as well?
100%. Now way this stock is not going to Rs 500 on the present earnings. Room rates are up five times and costs are more or less fixed. Tatas have deep pockets and they have weathered the storm.

Is telecom a sector that you are bullish on?
Data and other things have become so much of a burden but one cannot do without it and that is why the new gold is Bharti and Reliance.