Sanjiv Bhasin | Sanjiv Bhasin portfolio: Why Sanjiv Bhasin won’t chase Tata Tech, go for CPSE ETF instead

Sanjiv Bhasin, Director, IIFL Securities, says “IOC, HPCL, BPCL are still looking strong. It is the whole basket of PSUs which are duly getting their recognition after many, many years. I am very optimistic that some of them will still have more steam. And that is why the PSU basket or the CPSE ETF – as I have suggested for the last four years – is the best conduit to buy 12 basic stocks.”

Were you lucky enough to get in on the smasher debut of the year that is Tata Technologies and what did you make of the stellar listing and moves that it made yesterday?
Well, no question, euphoria and that is telling you that quietly we are in a broader market and people are not even acknowledging that. I think Tata Tech listing was a superb listing. But with Tata Elxsi and a lot of the other names trading cheaper and at less market cap and also with a very strong proven record, I would not chase this stock. Let it go to people who are delving into that. I would still stay with some of the largecap plays which are giving me much more reasonable comfort on owning. HCL Tech has been my top pick over there. I still think HCL Tech is headed to Rs 1500 and I would add a Persistent and Coforge on declines.

What’s happening in the IPO market? I have been saying is “sab chance pe dance kar rahe hain (dancing on the chance)” . What do you say?
I agree with you that everyone is dancing on the chance because ab maal hi nahi hai. Jab aapke pass maal lena tha toh aapse liya nahi gaya (you did not pick up the right stocks at the right time). The US market has gone to new highs or is almost there. And why are we doubting this rally? Please keep your eyes and ears open. The FIIs are no longer the driving force. It is the local retail investor. He is lapping up whatever good stock he is getting even though it is at a premium.

Yes, everyone is dancing on the chance because they are getting an opportunity. But yesterday, whoever bought in IREDA at Rs 51-52, also sold it at double at Rs 87. So, I am of the opinion, there may be a lot of froth in the IPOs because there is chance over there. But you have to be a little bit watchful.

However, the bigger market picture is simple. you are getting a lot of opportunities. Look at the stocks. I had said that at Rs 35-40, NBCC is a no-brainer. It did not work for two years. Yesterday, it hit a new high of Rs 76. Now, it is looking good for Rs 100. So, there is a lot of valuation comfort in a lot of businesses across the board. PSUs, power and railways which are giving opportunity. You have to just wake up and smell the coffee. The broader market is where I would be very comfortable with a Kotak or an SBI and HCL Tech to put my money.

But BPCL in the last one month, is up 22%. What has happened? Nothing has changed for them. But stocks have come back.
Correct. And that tells you that refining margins have arguably been the best. Results were very good and the undoing has been the cheap Russian oil which they have been getting at a discount. You did not have to make tom-tom and advertise. But quietly, they were doing that. Plus, they process harder and softer both types of fuels rather than Reliance which just processes hard. So that has been the changing difference for IOC. IOC, you did not mention a Rs 5 dividend and almost a 30% gain.

IOC, HPCL, BPCL are still looking strong. Like I said, it is the whole basket of PSUs which are duly getting their recognition after many, many years. I am very optimistic that some of them will still have more steam. And that is why the PSU basket or the CPSE ETF – as I have suggested for the last four years – is the best conduit to buy 12 basic stocks.

Do not chase the new stocks at new highs because you have the fear of losing out. But if you chase an ETF, that is the CPSE ETF, it comprises about 12 of the best blue chips of PSUs. I still think HPCL, BPCL, IOC are headed higher.They’re headed higher. This is a sector where you may say that the spirit of true deregulation has not been followed. Oil right now is manageable. But if oil goes higher, we’ve seen how oil marketing companies have to bear the burden. The government has gone on record and said that they are good citizens. Somebody has to be a good citizen when there is a problem. So right now, things are looking good. But if crude goes higher, they will not get their bit.
Agreed. But that has been a constant foray. In the last two years, there has been market dynamics on crude and diesel pricing. And the government has not interfered in any way. So there has been a pass-on effect. Yes, the weaker dollar makes them a little exposed to the FX fluctuation. But their margins and their gross refining have even done better than Reliance.

I am in the camp that markets are not looking at that broader and that 20-year-old picture of crude at 80 and 90. Look at auto sales. Autos are doing the best when crude is on a high.

I think growth is back. The Indian normal middle-income citizen is spending where he wants to. And like you said, if December is a robust month, then crude oil consumption and so on is very strong. So distillates are doing well. GRMs are at a high. And the Russia imbroglio has played out excellently for the OMCs in India.