Time to buy into IT and also to hold on to bank stocks: Dilip Bhat

Dilip Bhat, Market Expert, says “as far as IT is concerned, I would say something like Infosys, TCS in the frontline, maybe Tech Mahindra in the mid-cap segment and maybe Tata Elxsi also looks pretty interesting from the current levels. I would say that it is the time to buy IT. As far as the financial sector is concerned, NIMs are possibly close to an all-time high and so I would say that it is not time to get out of the banking sector. One should hold on to them because the going will continue to be good but whether you can make significantly great money from here, I have my own doubts.”

Which is the one niche consumption stock you are bullish on? There are folks who like watch companies, liquor companies or shoe companies. Vedant Fashion has done well, Campus Shoes has done well, what do you think could be a good, decent, 15-20% compounder from here if somebody has to bet on the consumption space?
In the footwear space, Relaxo certainly has a lot of ingredients in them. A lot of things are going for them. Of course, they made a mistake when they increased the prices of their best selling footwear but otherwise they are putting their act together and sooner than later we will see the numbers coming back in a very robust way.

These companies typically have a very good operating cash flow. So if I were to pick and choose from the lot, Relaxo still appears to be very good, followed by Bata in that particular segment. But otherwise, the liquor space continues to be something that one should always have in their portfolio in spite and despite all the kind of tax earners that they keep on getting and potentially they will always get it but we see that despite all that the volume numbers will still give them a very solid support.

Generally in this kind of industry, it may take a couple of years for the tax regime to stabilise but United Spirits still holds that potential of compounding at least 15 to 20%, if you were to take 3 to 4 years. But that is a stock which you should have in the portfolio, which is what my strong opinion is and that can give you a very decent ROIs to your portfolio too.

We have got two consensus trades in front of us; one IT which is a consensus avoid. Second is banks, which is a consensus buy. Now, money is made when you go against the consensus. Which consensus is worth going against – moving out of banks or buying IT?
I have been maintaining for some time that despite the uncertainties and the troubles that we see for the IT sector over the next couple of quarters, IT is a sector where there is a great opportunity to buy and build your portfolio because the risk return is heavily loaded in favour of IT from current levels. Most of the risk is probably already priced in and there possibly may be some bit of risks for them in the next couple of quarters.

But considering the fact that all these companies are very well managed and the conversion from EBITDA into free cash is so very high, the payouts have been so good. This really presents an opportunity to buy some of the stocks and especially the frontline stocks and what I mean by buying is once you do a deferred or SIP kind of buying in IT which is what I have been maintaining.

As far as IT is concerned, I would say something like Infosys, TCS in the frontline, maybe Tech Mahindra in the mid-cap segment and maybe Tata Elxsi also looks pretty interesting from the current levels. I would say that it is the time to buy IT. As far as the financial sector is concerned, NIMs are possibly close to an all-time high and so I would say that it is not time to get out of the banking sector.

One should hold on to them because the going will continue to be good but whether you can make significantly great money from here, I have my own doubts. But yes, as a part of giving the resilience to your overall portfolio and even getting a reasonably reasonable return, one should still hold on to the banking sector.