Nifty outlook: Nifty can climb up to 11,000 by Diwali: Sanjiv Bhasin, IIFL

In an interaction with ET NOW, Sanjiv Bhasin, IIFL, talks about the stocks and sectors that look poised to bounce back; offers his view on IT, pharma and FMCG and reveals where he is putting his money at going into 2019. Edited excerpts:

ET Now: Do you think that the worst of the fall is behind us or do you sense a further weakness dependent on how much the US equities fall?

Sanjiv Bhasin: The markets were underperforming of late more due to local issues like the IL&FS fiasco, oil rally and rupee weakness. The much needed Dow correction is now telling you that there is a lot of uncertainty and the oil bulls is where you are seeing a lot of weakness. For the Indian markets, it only means good news as the dollar is weakening. Now the emerging markets, particularly India, should see a lot of constructive buying and we are positive on this fall and have rather used this fall to buy.

Another 500-600 points on the upside are definitely on the cards and if I can stick my neck out I would say Nifty could climb to even 10,800 to 11,000 by Diwali.

ET Now: Focussing on IT sector at large, how much of the optimism, do you think is already baked in into the prices? Should good number in earnings be used as opportunities to profit take?

Sanjiv Bhasin: Over the last two-three weeks we have been saying that use all rallies in IT to exit. TCS has come out with the excellent numbers but they also indicated that this weakness in rupee just aided margins of about 1% or so in this quarter where the rupee has fallen around 12 per cent. It tells us that it is a myth that weak rupee is going to give IT companies large income on the treasury side.

I think most of the IT companies are well hedged and are fully priced. If we want to play the weak rupee, we would rather play it through pharma. But there are a plethora of stocks and sectors which are beaten down fairly. To name a few, we have are positive on – Maruti, Bajaj Finance, Eicher Motor, UltraTech – the real hardcore India where we think the pessimism was overdone.

IT will rightly take a back seat, all rallies will be used to sell and if rupee strengthens more then the local cyclical should do relatively well for the remainder of this month and next.

ET Now: How are you reading into Hindustan Unilever’s performance and what indication does it give to you for FMCGs at large?

Sanjiv Bhasin: The numbers were highly impressive given they have been able to maintain margins at 21 per cent and overcome the double whammies of rising interest rates and oil. They have hedged themselves perfectly. These numbers tell you that the consumption part, particularly the one on personal care, is doing extremely strong. HUL has indicated strong numbers on the cream side and on the hair shampoo side and it will only start to get a bigger fillip given they have a better period coming ahead after the shraad. HUL’s numbers tell you that the correction in some of the FMCG stocks may have been overdone and this is a good time to buy some of these names.

ET Now: What do you think should either be bought or avoided in near-term?

Sanjiv Bhasin: I would advise staying away from IT. You may see a decline in some IT stocks post the Q2 results as the best of IT has played out. Focus on sectors and stocks where pessimism has given an opportunity to buy and be with some of the bellwether stocks. Some of the names like I said earlier are – Reliance, UltraTech, Asian Paints, Bajaj Finance, Maruti and Eicher. Some of these names are showing a lot of strength. They have been resilient in this fall but the other pedigree names on the consumption side are likely to bounce back very fast after this one-quarter hiatus. We are underweight on IT and overweight on pharma as a rupee proxy but cyclicals is where we are putting our money going into 2019.

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