Go contrarian, buy pharma, midcap IT and power stocks: Sanjiv Bhasin, India Infoline

In a chat with ET Now, Sanjiv Bhasin, India Infoline, says as far as tech majors Infosys and TCS are concerned, he would prefer the latter.

Edited excerpts:


Last time we spoke, you advised your clients to book profits. Now Nifty is looking jammed but when it comes to individual stocks, the spring time continues?

We stand by that view. At that time, we were above 9200. We did advice getting into cash in certain stocks, sectors and the indices and we continue to hold that 8700-8750 can be tested next month. That is where you would be redeploying your strategy. We think one should be a little bit contrarian, getting into some of the good pharma picks, some midcap IT stocks and some of the power plays.

What about Sun TV?

A disclosure – at close to Rs 700, we put out a buy and we had a target of Rs 850 and it reached that yesterday. We thought a lot of weightage was given on the political imbroglio which actually got solved in the positive and since then the stock has been on a tear. This along with Zee should be the biggest beneficiaries of increase in ad revenue, tight control and the launch of DTH would be an added kicker. The stock is slightly overbought right now but there has been huge underwriting on the stock as far as ownership goes ans that is getting corrected. We expect another 10% upside in this stock in the next three to six months.

The Aditya Birla Nuvo –Grasim merger has been cleared and soon Aditya Birla Financial Services will be a listed company. Do you think the proposed unlocking in Aditya Birla Nuvo could really create a lot of shareholder wealth?

Yes. When this whole thing happened, there was a big decline in Grasim which we thought was a brilliant entry point because the same thing happened three years back when UltraTech got all the cement plants from Grasim and Grasim became a holding company. AB Nuvo Financial will be a big wealth creator. We have seen rerating in most of the so called NBFCs and service providers. Reliance capital is a pure example of a stock ehich has been rerated. Given the Birla pedigree and how their asset management has been garnering more than fair share of their market cap, everything will add up. For us, Grasim and the whole group is a buy on any decline.

Which way would you lean –TCS or Infosys?

I would take TCS to be the bellwether. Even though like you said Infosys is trading at about 14 times and TCS is now around 16-17 times. I still would put my money on TCS. The management sounded on the positive side on the margin front and they have almost 40% share in the BFSI space and that actually will turn out to be a positive if they can get more clarity on the H-1 visa.

The next two quarters could be lean but if you have a one-year window, TCS could give you at least 15% upside. The buyback has given a lot of comfort on any decline over here. I would also make a disclosure that we have recently upped our coverage on MindTree. We think that midcap is giving a lot of comfort on the risk reward and in the last quarter the management was very confident of volume, margins and growth coming back. So MindTree would be my dark horse around this Rs 440 level.

ET Now: I would like to draw your attention to what is happening in the entire textile/apparel space. Raymond at Rs 700, Future Group of Companies are up about 70% to 80% this year. Anything special which is driving retail/retail apparel companies?

Sanjiv Bhasin: Personally it was some of the listing of the D-Mart and then it spilled on to Future Lifestyle, Future Retail and now Raymond has been an outperformer on the back of their real estate arm which is going to be in development. Plus, as a brand it was undervalued.

We have one smallcap pick– Nahar Spinning. It is from Ludhiana and the cotton cycle is showing a lot of uptick and margin expansion in this company. It was at Rs 110-115 when we recommended it. Yesterday it hit Rs 144-145. We would advice to buy on declines. It can be a huge outperformer as cotton prices have hardened and margins can expand. Nahar Spinning would be one of my top picks over there.

But Nahar is a spinning company. It has got nothing to do with retail. It is a pure play on cotton demand and the spread between cotton and spinning margins.

Yes but their group company is Monte Carlo Fashion. Nahar owns a large stake in that. We think Monte Carlo from being only a pure woollen garments has now diversified into the cotton side and the retail side on the fashion side. That again will be value unlocking. These two can be big conduits because both are listed stocks and you can pick either of them.