Sanjiv Bhasin picks 3 sectors that may outperform in near term

"The overall benign environment remains that you have to be a little neutral over here. I think technology, pharma, FMCG, those are the favoured sector on seasonality, on US cues, and on local demographics," says Sanjiv Bhasin, Director, IIFL Securities.

What is your sense given the fact that now we have seen the markets sort of simmer down, the portfolio allocations in place, what does this spell out for the markets for the rest of the week?
I think a large part of the fall and pullback have been done with. You made new highs. I think you will ponder here for some time. The allocation of portfolios may give a little fillip to some of the defence, railway stocks, which I think will see selling.

The overall benign environment remains that you have to be a little neutral over here. I think technology, pharma, FMCG, those are the favoured sector on seasonality, on US cues, and on local demographics.

PSUs may give you trading rallies, but they are no longer going to be giving that output which they were. Secondly, if you read today, SBI has raised the deposit rate, which tells us that fund flow or liability franchise is not growing as fast and you will have to sacrifice your NIM to get that extra cost of money, which for PSU banks has been a very benign environment.

And if they are going to raise deposit rates, then there could be a little bit of quirkiness. We still think largecap banks offer better value. But IT is something which is exclusive. Again, Nvidia, Amazon, that whole basket is an outperformer and IT India has not done much.

I think the next leg of rally, the leaders will be IT. So, we continue to be positive on IT, benign on the index. We do not think there is much upside. You have to also deal with the Fed, which is to meet day after tomorrow and I would lay more stress on the upcoming budget where a lot of the consensus has to be based with a lot of the tri-party agreements. So, benign here, stock specific, I think IT and pharma and FMCG can be outperformers, that is where we are looking to up our portfolio and reduce it on PSUs.


A lot of stocks as well which are in focus this morning and I just want to highlight these block deals and spree of them which are happening of late. Now, InterGlobe Enterprises, that is the promoter entity, is looking to sell that 2% stake. I mean, we understand that they are incubating a lot of businesses and maybe looking at cash and given that the stock valuation is at its peak right now, what better time than now. But there is Honasa, IRB, bunch of these block deals. What is it that you are making of this trend?
A very good observation and that tells you that a lot of the long-term money is actually trying to get out at these prices and because of the fervour, because of the local retail flows, they are able to sell and still see stocks go at a premium.

I mean, the InterGlobe management has been selling all the way from 3200 if I am correct and the stock has only been going higher because of the environment, because of the business, which is doing exceedingly well. So, in a bull market, anything which is lapped up is going to be good for slightly medium to longer term.

But you have to be cautious on some valuation parameters also. InterGlobe definitely has been a big-big outperformer. I would still go with GMR and Ashok Leyland which I think are ancillaries to that.

GMR, because of the airport and the Aerocity, and Ashok Leyland because of the bus weight which is increasing their presence in all other places. InterGlobe for me is a hold if you have it, but not an add. On the other hand, like you slightly pointed out, some of these sellings is also related to reducing stakes and we have participated in this block deal of Mphasis.

Mphasis I think will be arguably the fastest of the block in the AI segment. Their overall business verticals are doing brilliantly and this sale by Blackstone is an opportunity to buy at a discount. So, yesterday, yes, as a disclosure we participated in that. We think this stock has a 20% upside and it is a relatively safety place at an index of 23,300 where IT I think can regain its mantle.

You also have the entire cluster of these PSU stocks and it is interesting from the 4th June declines some of them have recovered, Mazagon Dock, Rashtriya Chemical Fertilizers, BHEL, SAIL, etc. But we were discussing earlier this morning that it would not be a synchronised move within PSUs and one needs to be fairly selective. Is that something that you concur with?
Correct, 100%. I think there will be trading rallies. You got to be nimble-footed and you got to be maybe in places where the valuation comfort is now there and just to give you a feedback about two weeks back we were very bullish on Bajaj Finance at 6600, 6650. We thought everything is priced in. And lo and behold, look, Bajaj Finance has gone back to 7200 on the back of their IPO finance.

So, a large part of the under looked at market or where the momentum was lacking, those parts have done well. IT, FMCG, pharma and I think PSUs now will see sell-on-rise in the sense that they are over owned and there was too much momentum and they will see some maybe consolidation.

You can look at some of the defence stocks maybe as a proxy to growth and some of the infrastructure plays in however well you can summarise those. So, infrastructure and defence maybe outperformers, the likes of NBCC, HUDCO still have more plays. But banks, you have to be a little cautious.


For Vodafone the news flow continues. This has been another of your top ideas and now the board is looking to consider issuance of equity shares or convertible securities as well. What are you making of this new development?
Like I said, the whole AB Group has been re-rated. By the way, UltraTech my top favourite, top pick, has hit new highs, so has ABFRL, so has AB Capital, so has Grasim and now Vodafone. It is a matter of time that Vodafone regains its momentum. Bharti is now an 8.5 lakh crore market cap company. Vodafone is struggling at 1.2. It cannot be, either Bharti market cap is misplaced or not because the ARPUs are set to rise, their 5G business expansion is online and I think from this month onwards their customer retention will increase.

So, for me, Vodafone is a no-brainer for 22 and we will take it from there. If you are invested, stay there. The rest, do your diligence. But you must remember, there will be tos and fros on debt recast and so the biggest icing on the cake is going to be the AGR dues which is due in July. If they do get that 40% reduction, then that will be the real kicker for this stock.