Take some chips off mid, smallcaps; 5 largecaps to go for now: Sanjiv Bhasin

Sanjiv Bhasin, Director, IIFL Securities, says “we have an overweight on Dr Reddy’s and Lupin. In banks, the market cap of ICICI Bank is now Rs 6.89 lakh crore. Another Rs 150 lakh crore will mean that this will be another entrant into the $100 billion club. The second would be Kotak. Arguably, the new helm is going to now lead from the front. . So, two bank largecaps and Dr Reddy’s and Lupin on the pharma side. We also have BPCL under our radar which can be an outperformer.”


Is it time to tread with caution a little bit given the January seasonality or do you think we could see the December momentum this month too?
Sanjiv Bhasin: I wish we could see that December momentum but wishes cannot be horses so there will be uncertainty, there will be little volatility which is part and course of the markets after running up so sharply. We are of the view that take some chips off the midcaps and smallcaps, get into some of the largecaps.


Largecaps are giving comfort. There will be a lot of FII buying by the way and that will be more concentrated on largecaps. Yesterday, we saw one single downgrade on Apple and it is down 6%, Nasdaq is down 250 points and the bank index is now one of the best performing indices. So, I think banks are going to be more proxy, they are largecaps, they are heavyweights. So, take some money off the table on your midcap and smallcap portfolio. Do not get lured by the feeling of missing out (FOMO) but be in the market. We are more tilted towards largecap banks, pharma and so on.

So, let us have your largecap list. What within pharmaceuticals would you recommend buying right now?
Sanjiv Bhasin: We have an overweight on Dr Reddy’s and Lupin. We are very bullish on Lupin and we have been there from Rs 750. Yesterday, it was up 6% against the market. And in banks, the market cap of ICICI Bank is now Rs 6.89 lakh crore. Another Rs 150 lakh crore will mean that this will be another entrant into the $100 billion club and I am looking at those milestones.

ICICI is a perfect case for that. It will be the biggest beneficiary of CASA ratio increase, the low-cost deposit and the sum of parts of businesses. I am giving a thumbs up to ICICI as an entrant into the $100-billion club, which means you can see at least a 15% upside in this stock.

The second would be Kotak. Arguably, the new helm is going to now lead from the front. They have all businesses which are firing on all cylinders, whether it is AMC, whether it is insurance, whether it is security and I think Kotak at this price gives me a lot of comfort. So, two largecaps over there and Dr Reddy’s and Lupin on the pharma side. We also have, as a disclosure, BPCL under our radar which we think can be an outperformer.

Given that you are pretty bullish on Vodafone-Idea, just wanted to get in your take on the recent news reports that have completely ruled out any investors for Vodafone-Idea, particularly billionaire Elon Musk. Do you think that that may have been fuelling the stock up move and now things could change?
Sanjiv Bhasin: I was bullish at Rs 11. At 18.5, I was not bullish. I mean, we have booked across the board. We are not in the camp which will buy on rumours. The real value lay at Rs 11 when you saw the ARPU strengthen, the government took a stake and I reiterate, there will be infusion of capital by someone unknown or the promoter. I still think any decline will be a buying opportunity. But as a disclosure, Rs 11 was a very fair point for us for a risk reward. At Rs 18.5, there will be rumour mongering and there will be volatility. But the stock has more than doubled in the last four months. Please take that with a pinch of salt.

I told you that the real value lies in unbundling when you know when you can have the risk reward. I will give you a similar example. At Rs 9.5-10, I liked JP which was among the most hated stocks. It yesterday hit a new high of Rs 23.5. Now, we are not asking you to chase it over there. Do your homework. Do your legwork and when you get these opportunities, some of these small or large or debt-ridden companies can be huge outperformers. Right now, we have a hold on Vodafone, but we will wait for more news flow on the infusion of capital before taking a next move.

In terms of a portfolio allocation towards PSUs specifically, should one take 15-20% profits off the table?
Sanjiv Bhasin: 100%, but remember most of the fund managers, particularly some of the PMSes said PSUs are taboo and you cannot have a view which is inelastic. Go with the market. REC, PFC, NTPC, Coal India have gone up three times. What more do you want? So, if you missed out, you are underperforming the indices. This is a time where money has been made. At Rs 35, nobody wanted to touch NBCC, at Rs 90 everyone falls in love.

It is just that the sheer ownership of some of these stocks can be frustrating, but time lasting. Now, I definitely take some money off and like I told you, I am very optimistic on the banks. I think their lending growth, their NIMs, their CASA all are looking good. So, stay with largecap. If ICICI is going to go into the $100 billion club, it gives me enough comfort, so does Kotak. It is a smaller bank like DCB Bank. We are looking for those ideas. PSUs are the ones which are the flavour of the day, the high beta play, which make money on a daily basis, but here you must take some chips off the block.

Take the chips off the block and keep the money in banks or buy something else?
Sanjiv Bhasin: No, there is no such thing as sitting on cash. It is better to be in largecap banks. I still like three PSUs -- IRCTC, CONCOR, and IEX and we are invested in those as a disclosure. They have just started to perform. We are up about 20% on our portfolio on these. But we will not change the business outlook. CONCOR, IEX, and IRCTC have a superb business model. It will only gather steam. The earnings and the price performance will be a little bit of a laggard.

But yes, do shift your portfolio. Zee is looking set to go to Rs 450 this year, so is DCB Bank. Paytm is giving an opportunity to get in now because most of the humdrum on exits is over. This stock is again headed to Rs 1,000. So do your legwork. Do your choosing. Find your right RM. Look at IIFL Securities or whichever brokerage you follow because the cardinal principle is, if you have a PMS or a mutual fund NAV, you are in the market.

There will be a plethora of stock rotation but the fund manager keeps the rotation going, that is why you will be able to sit at maybe 24,000 also, but you will have to see maybe even 19,000 if the volatility persists. So, the only mantra to creating wealth is staying invested, let the fund manager do the sectoral shift or if you are smart enough to do it yourself.