Bet on YES Bank for 20-25% upside in a month: Sudip Bandyopadhyay

Sudip Bandyopadhyay, IndiTrade Capital says there may be some good reasons why RBI decided not to cut rates this time around. "There is a lingering worry about the economy and earnings picking up," says he. Edited excerpts from an interview with ETNow:-

ET Now: What are the triggers that are putting so much pressure on the overall market sentiment?

Sudip Bandyopadhyay: There are few things which you have to keep in mind. One, the US-China trade deal which was assumed to have been done is not there on the table yet and there are a lot of uncertainties and that is creating a little bit of nervousness amongst the global investors. So, there is a bit of risk-off mood as far as global investors are concerned and they are definitely taking some money off the table. While European markets and US markets may not be yet showing the signs but as far as emerging markets are concerned, they are the first ones to get affected when the risk-off mood sets in.

The second is a domestic factor -- the statement by Mr. Kumar Mangalam Birla. Mr. Birla said unless there is some definite relief, then probably Voda-Idea will shut shop and that definitely is a matter of huge concern for the market and overall business and investment sentiment.

The last I would say are the economic numbers that are not encouraging. The interest rate cut which everybody was pencilling in has not happened and there may be some good reasons but the fact is market definitely was disappointed yesterday. The fact remains that there is a lingering worry about the economy and the earnings picking up.

ET Now: Can you tell us given the carnage that we have witnessed in the last couple of days as far as the banking universe in concerned, what are some names that are holding out for you?

Sudip Bandyopadhyay: Well SBI is there definitely. There are a lot of positives as far as SBI is concerned. We are going to see the listing of SBI Cards and that is a significant value unlocking event for SBI and it definitely augurs well for the investors of SBI at this stage. Second, value unlocking will happen through UTI AMC listing and again SBI will be beneficiary of value unlocking. SBI is a good stock to consider at current levels. I believe the correction which happened during the week is an opportunity for an investor to get in and start accumulating SBI.

Among other larger banks, we have a positive view on Axis Bank as well as ICICI Bank. Both were originally corporate lenders but they are trying to devote their book to retail and significant work is happening in that direction. The Supreme Court judgment on Essar Steel definitely helps a) in recovering only Essar Steel related dues and b) also in other similar NCLT matters. Going forward the recovery process will get smoothened to a great extent. We are bullish on these three stocks and investors can look at it at these three banks at this stage over other banks particularly other PSU banks. We are a little cautious on other PSU banks and will advise investors to hold on before they start buying other PSU banks.

ET Now: What about NBFCs and HFCs? RBI did announce a slew of reforms or a slew of tweaks in their norms as far as small finance bank-related developments are concerned. So on back of that which are some NBFCs that are likely to benefit the most?

Sudip Bandyopadhyay: The norms which have been announced will eventually benefit a lot of NBFCs who want to convert themselves into small finance banks. One has to yet understand the full implications of that. There was a little bit of disappointment as far as payments bank conversion into small finance bank was concerned. I believe there are some roadblocks to that in the new guidelines and we will have to wait and watch as far as the lenders are concerned. Muthoot Finance, Manappuram Finance, Shriram Transport Finance definitely look good at current levels. All three companies have solid fundamentals and fantastic management teams driven businesses. Yes, there are liquidity challenges and some challenges in the economy, yet they are good businesses available at an attractive valuation even today.

ET Now: What are your trading ideas for next week?

Sudip Bandyopadhyay: We have some agressive suggestions for the banking space, especially for investors who have a risk appetite. I think Yes Bank is looking definitely oversold. Yes, there are significant concerns surrounding the names of the investors which they have lined up and I think market did not like those names. The stock has been beaten down mercilessly but having said that, at current levels, we find the stock attractively valued as long as the funds are coming into the company in the near future. The franchise value of the bank is definitely more than what it is quoting today and for an aggressive investor it can be a very good bet for an upside of about 20 to 25% in about a month to month and a half’s time. It is definitely worth looking at this stage.

The other is a slightly long term view on cement. We like cement on the back of the fact that pricing power is coming back to the cement companies who have operating units in northern and central India. JK Cement is one company that has a fantastic margin on account of their stronghold in the business of white cement and this can definitely be looked at the current level for a one year hold with about Rs 1,500 target.