Be overweight on 3 largecaps now; bet on 2 midcap dark horses: Sanjiv Bhasin

Is it getting a bit more difficult to find gems and dark horses because a lot of these stocks have already seen a massive runup?
Well it will always be a glass half full or half empty. Ask those people who are sitting and waiting for that inevitable correction. Corrections do not happen by choice and money is not made by default. It is only made by staying invested. There could be a lot of froth on the midcaps but who is to answer? The type of flows we are getting into mutual funds are all directed towards that.

After Prime Minister Modi specified PSUs, now obviously the best play has been seen in defence, power and railways. There could be a lot of froth but our job is to find stocks which make money and we still have two dark horse ideas which we will give you. But now is the time for largecaps to definitely outperform. Firstly, I am bullish, I think 20,000 is coming in this month itself. And you could see some consolidation/profit booking in mi-caps.

20,000 this month itself, what is driving that conviction? We are at 19,560 thereabouts at the moment; what is driving that? What do you think will take leadership?
The last 400 points are going to be very difficult. But look at the ease with which midcaps are rising every day; that tells me the feeling of having missed out (FOMO) is humongous. Global cues are extremely positive. You will have this, you know, tethering on the bond flows and yields and a little bit of the rupee. The underlying macros are the best ever. I think that it is going to be the big boys. So Reliance from the largecaps, Apollo Hospital, ICICI are the three names on which we are very bullish. You can add a Tata Consumer given that consumption and Starbucks will see a lot of traction with the G20 and the World Cup.

One of my midcap picks, Devyani has hit a new high. But I definitely think Tata Consumer has miles to go. However, this is the time to start to get overweight on Reliance, Apollo Hospital and ICICI. Apollo Hospital is seeing peer groups which are getting listed and their market cap move up whereas this stock has done nothing. Apollo is headed to Rs 5,600. We have seen Yatharth and the new listings get oversubscribed many times. The average revenue per operating bed was Rs 58,000 this quarter, which may be 9% upside quarter on quarter or maybe yearly. So one can imagine the potential which insurance and health has given these hospital stocks. Hospital stocks are a no brainer. So Apollo rules the roost.

Reliance is telling us how it is en-cashing its other businesses, the verticals, what it is investing, the oil to chemical business. If you are re-rating ONGC, then Reliance has to be the next in queue.

Thirdly, ICICI is the largest lender. Two midcaps which are dark horses and take it with a pinch of salt that the midcaps may be a little frothy, but there is a lot of value. The first would be Tata Tele. It is the marketing arm of tele services on ICT, on AI, on cloud computing. It has an arrangement with Zoom. You name the digital part and Tata Tele is there. Secondly, many years back, in 2005-07, Tata Elxsi used to be Rs 35-50. That is when I invested, realizing what digital potential was because Mr. Ganesh was an excellent CEO. Now, the House of Tatas is something I am very bullish on. Plus, they have three players, TCS, Tata Elxsi and Tata Comm, which do not have the retail focus. That is where Tata Tele comes in. It is Rs 88-90 rupee stock. The business is brilliant. It may take time, but it could be easily be a doubler, tripler from here.You had the other dark horse bet for us as well, which is that stock?
The other dark horse is JP Power. JP Power last quarter came out with an EBITDA profit of 450 crore. The net profit was Rs 110 crore and we know that there is a debt overhang but it has 2500 megawatts of power capacity, 500 in Bina and 1320 in Nigrie, which are thermal and 400 in Vishnuprayag. Now, you cannot have power assets trading at Rs 5,000-crore market cap, whereas NTPC now is the largest player. I think that JP Power is in the process of divesting some of the large assets.

Plus, on the other hand, the holding company JP already has more than doubled in a week. So JP Power almost doubling to Rs 15 would not be much of a problem. Beyond that, it will depend on how fast the debt can be reduced so return on equity improves. But at Rs 8, you cannot get a better stock or better bargain, which has got everything in it regarding power.

Any sectors that you believe currently are looking undervalued?
Slightly expensive stocks like Jubilant, Devyani and Tata Consumer, but I will go with the brands. I want to take risk on these largecap stocks, which are expensive, but the brands are great. One can see the whole thing taking off from the G20 summit, the World Cup.

Secondly, do not undermine the potential of Paytm and PB Fintech. Zomato has doubled. Even these stocks can give you a 50% upside. They are slightly undervalued, even though they have run up from Rs 450 to Rs 850, remember they have fallen from Rs 2,100. Take that to be the benchmark now, the highs, which were there, not the lows.

What about Voltas because that was one of the stocks that you were positive on. Today, it is doing quite well.
You had to be discerning to buy it at Rs 750 when there was talk of excellent rains and so on. The humidity has come now and I always held that Voltas is not a business only on consumer electricals. They have a 25% market share in setting up electrical cooling towers in the Middle East and that is gaining huge traction. Plus, now with Mr. Noel Tata talking of that being one of the big consumer plays, this is going to four figures.