There is a bit of a debate going on in our studio at the moment as to what exactly could really play out in the market now. So, after such a massive series, how much probability is there that January series may also be positive or do you see some profit taking leading to negative Jan?
Sanjiv Bhasin: Enjoy the party. Enjoy the weather. Who knows what January will do? One of my followers who has been very active from Chandigarh wrote, we have never seen so many negative events in the span of three-and-a-half years –Covid, Russia-Ukraine, oil about 110, 11 rate hikes by Fed. Israel-Hamas, 8-9% inflation in the US, EU, a huge selloff…anything that could go wrong have gone wrong and yet the market rewarded those who stayed invested.
So, the bottom line remains, you have to be owning stocks in India. If you own India, you are laughing your way to the bank. Yes, I am also in the camp that says we may hit a crescendo. Generally, when fools buy, you should be looking to sell or book profits and when fools sell, you should be looking to buy aggressively. So, it is the total opposite of what dichotomy is, that the biggest underperformers or the underweight people who are at the FIIs and who are now turning slightly overweight, there can be a crescendo toward 22,000, but that would not be the place to be brave on your trading side. Try and book profits, let the market ride out.
We know we are headed for a standalone budget in the sense it will be just a statement of account, but there are uncertainties, there is the election and X, Y, Z. So, always remember, leave some profit on the table for the other person to earn and enjoy the seasonality or the best ever period we have had and we are taking it lightly, but the type of outperformance you have seen in the broader market, I think every investor who is invested has actually made money. So, kudos to the performance of the retail investor who is actually the backbone of this market.
One of the stocks that has seen quite a bit of run-up has also been Zomato. There is a bit of a negative news flow around it, 401 crore tax notice, etc, that they have got. I know this one is just one of those events, but structurally speaking, is the stock now more susceptible to negative news rather than positive news?
Sanjiv Bhasin: When these stocks run up, they run up like there is no tomorrow and when they fall also it is a similar thing. You saw that in the case of Paytm, over one change in which the RBI put a stricture on unsecured loans, 950 became 600 in less than three days. I am not seeing the same for Zomato because Rs 400 crore will be disputable. It is like some of the casino companies or the gaming companies which are again disputing the excise notice and so on. I will not get into the nitty-gritty, but I think any decline in Zomato is a buying point because in the end, what goes on in your daily life? Your food purchases, your everyday use of fintech on Paytm, PB Fintech, Zomato are now going to be your daily necessities and over a period of time, profitability will start to kick in as they mature into businesses. I would see this as a little bit of a damper, but in a bull market, every fall will be a dip to be bought into, particularly in fintechs.
There was that Lupin note as well that came out from SPARC, wherein they have increased the target price. Let us discuss that.
Sanjiv Bhasin: Lupin weathered all the negatives close to that 700-750 about four to five months back and we had a relative outperformance on that stock at that time. Now the news is turning out to be positive. In the generic market in the US, they have a huge market share. Pricing is back. In their other markets, locally also, they have launched some of their new products and I still think Lupin has the margin to make another 20% move. A disclosure, this is in our portfolios. We are positive on this and Sun Pharma and we think both these stocks are the ones which will lead the pharma pack higher and valuations are relatively reasonable against Dr Reddy’s or Cipla.
What about your take on the entire cement basket? Just owing to the kind of synchronised move we witnessed yesterday, what channel checks are suggesting, and the fact that brokerages are giving it a thumbs up, where does your preference lie?
Sanjiv Bhasin: UltraTech has been my top pick all the way from 6,000. As a disclosure, this is one of the top cement plays in our portfolio along with Ambuja. We still think UltraTech is headed to 12,000. Now 12,000 seems to be a number because it has just crossed 10,000 and the speed of gains will be faster than you ever thought. But take it with a pinch of salt. Yes, cement stocks are not cheap now in the sense that they are pricing in a large part of the positives. But if you are going to see real estate, infrastructure, roads, all go through the roof on spending, then cement has to be the natural catalyst which will gain. It is like saying the OMCs because you look at the basket. When did you ever know that we are getting crude from UAE in rupee and the ones who will be laughing their way on results will again be the OMCs. So, UltraTech and Ambuja are two of our top picks. We have them in our portfolios and we do not intend to sell them for at least this year at least.
What are your thoughts on Godrej Consumer and similar companies?
Sanjiv Bhasin: Well, yes, Godrej Consumer has been an outperformer on the back that their portfolio is doing well. Their Indonesia and allied markets are doing extremely well where they are getting double-digit growth and at 650-700 this was a really undervalued stock. It has now been one of the outperforming stocks. Colgate and Marico are three stocks which are in our portfolio and we are extremely positive on all three. The pace of the rise of Godrej has actually caught us also by surprise. From Rs 850-900, it has been one of the bigger outperformers. But Colgate is another one which we are very-very positive on and Marico is an underdog which we think can be a huge outperformer on the back of lower input costs which can add to their margins.
There were 20-21 IPOs in the month of December alone. Today, Azad Engineering is going to list. A lot of these companies have left value on the table. Now that a lot of these have got listed, can you talk about some of those which you would recommend as a buy?
Sanjiv Bhasin: Last week, I told you to subscribe to the SME, Electro Force and I gave you the reasons for that. At Rs 93, they have a Rs 16-crore profit this year which is going to go to Rs 35 crore. Turnover will rise to Rs 150 crore. It is one of the best plays as far as having a clientele of Schneider and Siemens and in the electrical industry, it has a very niche area in prototype and the other businesses. That stock hit a circuit yesterday. I still think this stock can go to Rs 150.
As for the others, you have to be a bit cautious. Nowadays, all TV channels are showing how film stars and sports personalities are investing in startups and so on. That is on the back of the ad revenue they get and I think that plethora is now telling me that there is a lot of froth in some of these startups which are looking for capital. They are offering these ads through sportsmen and every film star is now owning portfolios in startups and that is where you start to question. I would say there is a lot of froth building up in some of these startup plays where a lot of money gets attracted to.
So do your homework. Largecaps are where you should be overweight now. If you want to stay in the market, be cautious on the midcaps.
A quick word on Aarti Industries, new targets are coming closer to Rs 600 and they are doing a lot of new tie-ups despite what is happening in the industry on pricing and dumping by the Chinese front.
Sanjiv Bhasin: Well, if you recall, at Rs 460-470, we thought that it was half the valuation of the rest of the specialty plays and for good reasons. There was underperformance, the company had cancelled a few contracts but it has a very good product line as far as the business goes and some of their intermediates, have almost a 50% market share. Now that is coming to roost and we know that if not today, the Chinese comeback, the demand for agrochemicals which has been a laggard because of inventory and so on will come back.
I still think Rs 650 is a reasonable target but everyone’s targets seem to be 20% lower. So, there is a left out feeling, I think this can scale to Rs 700 or maybe more and it depends on the follow-through of what the news flows are. But we continue to think SRF, Atul, Navin are three plays which you should be in and fourth is Aarti but Aarti was in our list around that Rs 465-475 level.