Here are Sanjiv Bhasin's top trading ideas

In an interview to CNBC-TV18, Sanjiv Bhasin of IIFL shared his reading and outlook on the market.Below is the transcript of Sanjiv Bhasin’s interview to Anuj Singhal and Sonia Shenoy on CNBC-TV18.Anuj: Do you cover Jaiprakash Associates? I am sure you will be covering UltraTech Cements, but your thought on this deal and how do you look at both these stocks?A: I will summarise it up in what you once said that UltraTech has got a golden deal. They got it at almost USD 122 per tonne and the present valuation of ACC would be close to 170 plus, so it is a win-win situation for UltraTech and it is a huge relief for JP that finally, even though in February-March they were struggling to not go down under, they have managed to get some reprieve.We still think JP has much more assets on its book. The market cap close to Rs 1,600 crore at around less than Rs 7 on the stock price was a very big opportunity to buy. We still think over the next one year, the marketcap should be closer to Rs 5,000 crore if all negotiations and restructuring of balance sheet takes place. So, it is a long-term hold if you can on a penny stock, but the assets on hand are hard. But, right now it is a win-win situation for UltraTech, which has managed to get a very big deal at almost 30 percent discount to what the fair value would have been.Sonia: So, at Rs 3,400, what is the risk reward looking like for UltraTech for those who missed out on the rally? Is it still worth a buy at this level?A: Now, the markets will have different contours and volatility. When we have been on your show and I have been advocating to buy those falls, we still think that five pivotal largecaps will hold ground going into 2017. UltraTech on the cement side would be the best play even though valuations may have reached a crescendo at Rs 3,400. We still think with a one year view, you could get close to Rs 4,500-4,700.The other four picks would be Tata Motors, Hindalco, State Bank of India (SBI) or Dr Reddy's Laboratories (DRL). This has been our basket of our top largecap picks which you should buy on any decline.Anuj: Let us talk about some more sectors and stocks -- big rally in public sector undertaking (PSU) banks, led by State Bank of India. Is this is a space that can still make money? Valuations are on your side if you buy them now, but there is still that fear on what could happen with the asset quality.A: We were a few of the ones who stuck our neck out and said that Rs 170, State Bank was a scream and fortunately, it has played out just that way.With a longer-term view, we made money much earlier than we anticipated. Bond yields if you recall have gone to below 7.45 which had spiked to 7.52. Globally there is an atmosphere where bond yields are being scrambled because of the fear of Brexit and in India, it has played out on the positive with the good monsoon and the new Reserve Bank of India (RBI) norms, which will make non-performing assets (NPAs) now less addressable on the balance sheet. So, some of the larger players like Punjab National Bank (PNB), Canara Bank and SBI would stand out. Right now, the stock has run well ahead of what the real position is and we would be cautious here, because we think that most of the good news would be in the price.Use any decline to buy because this could be a very good space in 2017 when gross domestic product (GDP), credit growth and the other variables on the macro play out positively. Also, we should see a lot of re-address on the NPA issue as collateral on real estate has been allowed and that has showed up the capital. Plus, the reinfusion by government of India will only be a kicker. So, we think, sum of parts, State Bank of India is a fair value, around Rs 190-200 gives you enough room for a 20 percent upside, but you will have to take at least a 1-1.5 year view from here on.Sonia: I wanted to come to you on some of the real estate stocks which have given at least traders great returns up until now. Any real estate stocks that investors should buy?A: Godrej Properties. It has been our top pick all the way from Rs 290. One of the best plays on real estate, hardly any ownership of land bank. It does it on a contract, pedigree name, guarantee of execution and there are large tracks which are now going on the front as far as the order book goes. So, even though the stock has run up quite sharply to Rs 365 plus, we still think that if you have a one year window then you could get almost Rs 450 on this.The other two names would be Prestige Estates on the back that the Bengaluru market is showing a lot of traction.Third name is of course DLF where the promoters’ willingness to infuse capital and reduce debt would be the added kicker. Plus, their whole proposal of being first on the real estate investment trust (REIT) front would add annuity type of an income. Now of course, DLF has run up very sharply, we would still wait for some decline, but if you have a longer term target, you could even look at levels of Rs 200 by the end of the year.Sonia: I wanted your thoughts on two auto stocks. Mahindra and Mahindra (M&M) which has an upgrade coming in this morning from Motilal Oswal. It is firing on all guns basically, tractors, utility vehicles, etc and Tata Motors after that strong set of numbers from Jaguar Land Rover (JLR) US sales. Which one would you buy?A: Tata Motors stands out and this is what we were alluding to when the Brexit fear got it down to Rs 427, that Tata Motors is now globally very well spread across all the geographies. So, it is not just going to be Britain or Europe. Even in the US you had astounding sales, almost 45 percent up on a monthly basis. It is well entrenched in South America, into large parts of Latin America and it is across the globe. So, it is truly now a global play and we think any decline will be an opportunity to buy. And on the plus side, commercial vehicle (CV) sales domestically are going to see traction once you see two barometers, cement and CV sales. These are the two indicators on the upside.For M&M, the valuations are slightly stretched and most of the monsoon news is in the price. So, we would be cautious there.Anuj: The retail stocks like IndusInd Bank, Yes Bank, HDFC Bank, Kotak Bank, we have seen minor correction in all these names. At what point will they become buy again?A: You will have to wait for the PSU Banks to peak out because they are seeing frenzied buying and that whole trade of being long on retail and short on corporate lenders has fizzled out. SBI at Rs 225 is seeing more traction. I would expect a day or so where you would definitely see profit taking and maybe fizzling down of the PSU rally and then when we get a decline, you should see some of the retail lenders, particularly IndusInd Bank and Kotak Mahindra Bank, they should come back. But it is just a sectoral rotation which is on the way where we are seeing PSU banks being the flavour of the day or of the month.Sonia: I have a follow up question to that comment you made about holding on to JP Associates if you have it and despite it being a penny stock, if you are patient, then perhaps over the long run, you could make money. Would you ascribe the same view to the other Jaypee Group stocks?A: Yes, surely. We have seen a lot of traction on the power side, whether it is the input cost, whether it is the coal, whether it is the regulatory clearances and assets are there. They cannot be recreated.Now, there is asset disinvestment going on. Already we know that JSW Power is on the lookout for certain assets. So the assets are extremely cheap, that is what we said. You have to look at the marketcaps -- Jaypee at Rs 1,500 crore meant that the marketcap was one third what we thought that the marketcap could be. And you could get that valuation benefit, but time has to be on your hands because we are not going to make 30 percent which is a regular flow. You are looking for a 150 percent gain over the next two years. That is why we are saying look for the asset, look at the value and look at how it can play out in the next few years, because sooner rather than later, on the macro improvement asset prices on these fronts should be on the uptick.Anuj: What about metal stocks? That is the other call. Stocks like Tata Steel, Hindalco, the huge rally that we have seen from the lows. Is that a space that you would still want to continue buying?A: Definitely, bull market. I wrote today the Brazilian Bovespa has hit levels which were last seen in August of 2015 on the back that iron ore and nickel prices have rebounded very strongly. Of course, the stocks have run up very fast, but we think any decline would be an opportunity to buy because the flavour of 2017 would be metals and commodities and not forgetting that upstream companies have started to perform because oil is very stable at USD 48-50 per barrel and we have seen Oil and Natural Gas Corporation (ONGC) just breakout. ONGC, Reliance, Oil India, just alluding from your point, we think the energy pack is looking extremely strong and with oil at USD 50 per barrel, it is a tailwind rather than a headwind. We think refining margins particularly for stocks like Reliance should see an uptick and that should see strength in the stock above Rs 1,000.Sonia: Wanted your thoughts on some of the fertiliser stocks, because the government has now, after 15 years, announced a reduction in the price of some of the key fertilisers. What impact do you think it would have on names like Coromandel, etc?A: A lot of these sectors were under-owned and were in the grip of weakness and they have seen a strong pull back mainly on the back of expectation of very strong monsoon and the reduction in the subsidy burden. So, we have to wait how it plays out on the price front. But any decline should be an opportunity to buy because we are seeing relative boom in commodities and that should be the spurt for fertilisers as a whole on a larger macro front. So, any decline in some of these stocks would be a very good opportunity to buy. For us, the agri-chemical plays, we have had picks like Rallis India, UPL and Chambal. We continue to be overweight on all these three stocks on any decline.Anuj: That is the view that largecap pharmaceutical has bottomed out. But it is one thing bottoming out, the other thing making big money on that. Any top picks in the pharmaceutical space?A: Rs 3,050-3,100 is a brilliant entry point into DRL. You have the comfort of a company buyback and most of the Food and Drug Administration (FDA) concerns on productions are almost on the back burner. Any decline in DRL should be an opportunity to buy. That is our top pick.The other would be Cipla, but close to Rs 480-485, we will not chase the rally. We think Cipla has enough product line in Europe, particularly on the acetylene front which could see a rerating in the next six months.Otherwise for us, for the last one and half year pharmaceutical has been an avoid to sell, rather than we look for bargains, because this may be an underperforming sector at least going into 2017.Sonia: The space that has made investors most money these days is the non-banking financial companies (NBFC) space and within that names like Ujjivan hitting new highs everyday, what is your pick of the pack there?A: Bajaj Finance. That is a pedigree name. It has chartically also been making dream highs and we still think that that could tread higher. However, like we said, this space may have been one of the outperformers. Right now, we would be cautious on that. Yes, Ujjivan was one of the initial public offerings (IPO) where we were merchant bankers as a disclosure and we had a buy rating on that and it has made a lot of money for investors. So, like I said, for us Bajaj Finance would be the top play.We are also slightly more brave and we would say around Rs 390-385 levels, Reliance Capital seems very attractive. On the back that Nippon Life would now be infusing capital in the insurance business and a lot of their other verticals including the stock broking arm are showing a lot of traction on the upside. So, if you can bear a little bit of risk -- because it is a high beta trade -- Reliance Capital should be a very good long-term buy with targets of close to Rs 475 in the next one year.