Federal Bank will be doubling by next Diwali: Sanjiv Bhasin

Consumption and banks are now due for a huge upside with some of the midcap NBFCs and banks stealing the show in the second half of July, says the Director, IIFL Securities.

There is renewed optimism around IT. But most of the IT names and Infy in particular have recovered 50% from the March lows. For the fresh entrants, would it be the best time to nibble into the stocks?
After a few days of volatility, the Reliance AGM and all the good news getting in, markets have again been showing a lot of wild moves. Like you rightly pointed out, IT has been the star of the month, of the week and of the last four months.

If you put your money where your mouth is, you have made money on the rupee, you have made money on the margins. No flying means that the bottom lines have got sharply accreted and that I think is a very sweet spot. But that also tells you that the broader market -- there’s metals, pharma a whole host of ideas. All you have to do is dig in deep and do not get swayed by the noise that this is the top and this is the bottom you have to be invested to enjoy both the ups and the downside.

Only if you have a stop, then only you will be able to enjoy the upside. I am very sure that we will keep our date with 11000 in the second half of July, that may be next week and we think stocks will outperform. Metals are looking very good. You will see the results next week from the likes of Jindal Steel (JSW). They will have one of the best results we have ever seen because exports have picked up. IT continues to power, Tech Mahindra, Wipro are two of my favourite stocks.

We also think consumption and banks are now due for a huge upside with some of the midcap NBFCs and banks stealing the show in the second half of July.

We have the big BPCL news with global strategic investors lining up. But the Street still seems to be viewing it fairly cautiously. Anything else from the PSU pack that you are keeping an eye on?
Well we have been long on BPCL, HPCL. The oil marketing companies will have inordinate gains given that the Government of India did a huge inventory buy on oil at around $28. Some of that spillover effect will come to the OMCs.

I think it is a win-win situation. If you own those stocks, stay there. If you are looking for good ideas, BPCL and HPCL will clearly take the cake. I also like some of the other PSUs like NTPC which has come up with stellar numbers and trades at a 7% dividend yield, as does Coal India.

The metal rally is very strong against the weak dollar which has hit a fourth month low. It will continue as it has just started to show steam. So, watch out for Coal India, NTPC both of which are very attractive stocks with 7-8% dividend yield. Coal India give a Rs 12 dividend which is almost 10%. HP, BP, IOC -- all three are looking very good on the divestment side.

What have you made of the Reliance AGM? Those strategic announcements that were declared in the 43rd AGM talking about the partnership with Google to build the Android based smartphones. They are also going to target a lot of the price sensitive feature phone users with new Jio phones. A lot of ambitious plans have been doled out. What is your take on Reliance Industries? Does it still merit a buy at the current levels?
It is tough to give a call on a stock which has doubled the market cap in the last three and a half months. But definitely, you have to be in Reliance. Everyone thought that the FAANG stocks were overpriced a year back. Amazon, Google, Microsoft, Netflix have all given up 50% in the last three months, so let us not get swayed away, but Rs 12 lakh crore market cap is the beginning of the upturn of a lot of stocks and sectors which can do extremely well given that now India stands to benefit greatly from the China imbroglio.

By the way, the Chinese market was heading towards $10 trillion in the last three-four days before the state government intervention came. So, it is miles to go on the Indian front. It started with Reliance and that will continue to get bigger.

I would rather suggest a 12 to 16 weeks SIP to be done in Reliance because that will price in all the volatility but please remain invested because you are going to see unravelling of the greatest event of digitalisation/kirana shops/whatsapp and a whole host of Jio platform verticals which will all play out on the positive side over a period of time.

The stock has been a doubler like I said and there may be not much room on the upside for now but it is a must own in the portfolio. A SIP for the next 16 weeks will let you ride the volatility and get you a good average if you want to enter and you have been waiting on the sidelines.

How are you looking at the PSU basket as a whole? ETNOW broke that a lot of marquee global oil companies are eyeing a stake in BPCL -- the likes of Rosneft, Exxon Mobil etc. That set the stock buzzing in today’s trading session. How are you looking at this move from BPCL standpoint ? Do you have a view on the PSU as well?
I just spoke about that. I think you will get a bid in excess of 500 to 550 on BPCL that is why I am saying there are still a lot of opportunities. Secondly, the government of India has put its money where the mouth is. When oil was at $25, they bought a lot of inventory. A part of that will play out in the coffers of the OMCs. So, BPCL and HPCL fit the bill perfectly. IOC is a dividend yield play. NTPC and Coal India are 8-10% dividend yield companies and excellent performers.

This basket or the CPSE ETF will do very well. But BPCL is the star there and along with HPCL, holds the potential of a 50% upside in the next six months. By the time the bids come, you will see the final paper being made or the buyer who can bid for closer to 550.

What is the take on Bandhan Bank because while the Q1 numbers have been fairly decent, the provisions have shown a bit of wariness. Are you worried?
Well no, you have to realise that a microfinance lender and that also coming from West Bengal and Assam which have been troubled over migration and cascading Covid cases. Bandhan Bank is very prudent and it is a very well run institution. It has very low delinquencies. The net interest income margins are very strong.

Now there is talk of dilution because of some merger. So for me, right now, Bandhan is an avoid but look at the numbers from Federal Bank. Federal Bank is the best stock to buy here. I can guarantee you by next Diwali it will be doubling. Mr Shyam Srinivasan is leading from the front. This is going to be the largest player in the gold loan segment after the gold financiers. Their NPA is at the lowest in 18 quarters, their net interest income margins and CASA ratio all are showing strength. Federal Bank would be my star pick for a doubler in the next one year.

I also like Indiabull Housing. They have weathered all the storms and it is giving you a very good opportunity after the recent runup and the small correction. Thirdly, RBL Bank. These three are slightly higher beta stocks and banks can power their way. Bandhan for me at this price is an avoid till we get more clarity on the merger or the acquisition which they are talking of.