Expect 1,000-pt rally in next 2 months, see Nifty near 12000 by Diwali: Sanjiv Bhasin
- 2020 will belong to the midcaps and would one of the best years for equity markets.
- Going into 2020, auto could be the best sector to be in.
- CPSE ETF is looking extremely good for a longer term view.
We are expecting a little bit of momentum to continue after about four days of gains but I am not sure if one should read too deeply into that. It could just be a momentary momentum. How are you reading into the markets right now?
We have been contrarian and we tried to explain to investors to use these 12 weeks of volatility to add to the portfolio and not let the underlying fear or rhetoric deter you from continuing your SIPs. We think the worst of the storm may be over. The 5% headline GDP this is being priced in. We know the slowdown effects of it but we think the government’s measures in transmission of lower cost of money is going to be the silver lining over the next few months. We are very positive on the festive season, we think the return of the consumer is imminent and globally we think that risk on trade is back. US bond yields have spurted sharply which tells you that risk-on trade is back globally. Sticking my neck out, I would say this Diwali closer to 12,000 would be my key, which means almost a 1,000-point rally in the next two months.
Which sector do you think would be the leader, taking us to those fresh highs?
Banks first. Look at the news around you, look at the pessimism, look at the yields. There was too much negative pessimism on the mergers also. So banks, industrials, select energy, select construction and consumption stocks all will be adding. But IT would be a market performer. Even the rupee may be stronger in the next two months. Midcaps, which have been the missing link, should start to see a huge uptick in the next two-three months. In fact. 2020 will actually belong to midcaps given the decimation and the sheer market cap discount to largecaps.
Anything from the broader arena that has caught your eye of late?
If I stick my neck out, I would say the CPSE ETF is looking extremely good for a longer term view. The select PSU stocks I could name would be REC, PFC, IGL, BEL, MGL, GAIL, NBCC. These are looking extremely positive with a three to five year view and hence the CPSE ETF actually captures them all.
Insurance is a theme which we spotted out six-nine months back and that has played out brilliantly.
On the largecaps, it would be UltraTech, Reliance, IndusInd Bank, Axis and Sun Pharma along with L&T which could stand out and on midcaps, cement would be one of the better beneficiaries with Ambuja Cement, Ashok Leyland, Federal Bank, IDFC First and Lupin looking very good on a slightly longer term.
Again my recommendation in the last 12 weeks would be that a SIP should be in place. We are six to seven weeks away from that and we have four-five weeks to go. As a disclosure, these SIPs will play out very well over the next five weeks where volatility again will be your friend, if you are invested in it.
Why is there a renewed optimism on MCX? Is there a fundamental reason attached to it?
In 30 years, I have not seen so much of pessimism and capitulation in a lot of midcaps. The midcaps can rally two, three, four times in the next two years. We have your conviction but stay put with those ideas and do not get deterred by the market rhetoric. The same is the case with MCX. The next five, seven, 10 years look to be very positive on equity asset or a SIP or investing and owning shares which means the underlying fundamental providers will definitely do well.
Same could be the case with MCX.
What is your take on NBCC and NCC which have seen a fair amount of beating in the last three months? Do you think these stocks can be bought after the recent decline?
A disclosure, we own both those stocks. We still have conviction that these are not three-month or six-month view stocks. Rather these are two, three, five-year stocks. You are seeing the type of order inflow which NBCC as a whole has from tier one, tier two, tier three cities; it is a debt-free company and the only problem has been the execution and the change of guard.
All rail land bank monetisation, all errand builders monetisation add up to that 8% to 12% PMS fees which they get. You cannot go wrong in this stock. In select PSUs, there has been total decimation and NBCC is one of those, But both NBCC and NCC are very good proxy playsto a revival in GDP. As a lot of monetisation of private road banks and land banks start, you cannot miss making money in these two stocks.
How dire is it going to remain for the auto pack?
The headline will always be more murkier than it is made to be and on the ground level, I am definitely seeing a large release of inventory for the likes of Maruti. We know that the commercial vehicles are the ones which are the worst hit but recovery is just around the corner. This season could be a trendsetter. Fundamentals may take another two quarters for balance sheets to get start showing on the numbers but we think that going into 2020, this could be the best sector to be.
We own three crore vehicles in a population of 130 -- less than 3%. In case of China, it is close to 11%. Tthere is a whole host of upsides which can come not regarding the reasons and the causes which are always there. Aspirations drive this and we think the aspiration level will soon return as is evident in the case of MG Motors and Kia where subscriptions far outstrip the demand. It is just a matter of time prices for once are in your favour as a disclosure Ashok Leyland, Maruti, M&M and TVS Motors are four stocks which are under our coverage on a SIP. We think 2020 could surprise with autos actually being one of the leading sectors.
Coming to banks, the recent move to link rates to repo rates is coming. How do you see that impacting NIMs if at all! More and more banks now falling in line post the RBI mandate. How do you see things shaping up on that front?
May be there is a small decline for a quarter or so. The liability rate is going to be hurt also. State Bank has cut the rate on the fixed deposit which is telling you that the liability rates are also headed lower, which again is a silver lining given that debt money is now going to definitely see equity as a better option.
In the short run, there is going to be a marginal disruption because the borrowing rate will also be lower but that actually should be a further impetus to be passed on to the end consumers and the missing link or the mistrust of NBFCs is getting over. I would be very positive given lower rates are here to stay and because the end consumer will be a large beneficiary which will spur lending and credit growth in the next few months.
Can the brief festive season dispel the economic doom?
Well markets tend to price that in. I have been in it for 30 years. I have never seen $18 trillion hide in negative yield assets and gold at Rs 40,000 with no buyers in the Indian context. People are happier selling, which is why you are seeing a lot of job losses. It tells me that the risk-off game has been played out fully. If anything, risk-on should be the game which was evident in the rumour of Fintech buying the Yes Bank’s stake.
I am very positive that in the next few months risk-on will be back and you would not expect 5% becoming 7% growth overnight but the measures will see a lot of the return of the consumption market along with infrastructure growth, which means more jobs could be created.
The overall despondency may have been overdone we are saying this is the cusp of a turn which in the next three-six months can bring forth very good news and 2020 would actually be one of the best years for equity markets as returns are back ended in most parts of earnings and macros.
Is it a relief at all that Blackstone is now looking to buy the rest of Indiabulls Real Estate assets?
Correct. Nobody is highlighting the positives. Indiabulls is trying to disseminate the negative news flow and see that their merger with LVB goes through. They are trying to sell whatever they can to reduce their outstanding. DHFL has also been able to get a lifeline to start its existing book. GE is almost 50% paid back in the excesses which it had done and a whole host of other things are getting solved.
So you know along with the pessimism these bright spots are getting missed out, the rhetoric will be little bit unnerving given that the market is at a cusp. But I am extremely positive with the two- month view where the market can surprise on the upside.