HAL OFS a subscribe or not?
100%. I mean, you cannot have a better play than HAL and BEL and Bharat Dynamics. And defence is here to stay. As a disclosure, we have been long on this stock all the way from Rs 1,250-1,300. It is a doubler, but we still think there are miles to go, given the balance sheet, given the ordering flow and now given the outlook that India is ready to do something for countries like Israel and so on. Defence is a must-have. Only the valuations were a little discomforting. This overhang of the OFS will be over and sooner you would see at least a 20% gain even from these prices.Where do you stand when it comes to the metals basket?
Very bullish. Last time the yields went to 3.8, you hit 115 on the dollar. This time the dollar is on the verge of breaking 100 levels and if it comes to 98, Hindalco will be flying to 500. Also, coke prices have softened a lot. So, both the steel basket, that is, Tata Steel, JSW, Hindalco; also, you can add SAIL and Jindal Steel. If you buy that whole basket or buy a fund which has metals over there, metals are going to rule the roost at least in the next three months.
The valuations are now very reasonable, given the earnings opportunity and the China reopening, that is going to be the real kicker for metals and banks and that whole proxy which I told you. But Hindalco is a must-have around these prices. JSW Steel can be a huge outperformer.
Is it a good time to buy brokerages? I have read a report that retail brokerages and retail activity is down 50%. What is the reality at IIFL?
Well, yes, there is sluggishness. A large part of the portion has been diverted to derivatives and options and people are a little bit on the low volume side. But it is a passing storm. As a disclosure, I cannot name our stock, I have options but I am very bullish on the industry as a whole because the intermediary phase of more and more funds or the brokerages are getting even more and cross-selling is picking up very dynamically. I would be very bullish on this industry if you have a two-three-year view. In the near term, operational costs can eat into margins.
You like HCL Tech which is cheap, but it is growing at a run rate which is higher than the industry average. But you also like LTIM?
Sanjiv Bhasin: Yes, it has the MindTree pedigree and the type of businesses and the merger are huge. I think LTIM is a flier from here. So, LTIM, HCL Tech and Tech Mahindra. In December, when we met, I had suggested that Tech Mahindra will be closer to Rs 1,020-1,120 on change of management and the change of guard will play out well. LTIM, HCL Tech and Tech Mahindra are going to be outperformers.
Why do you like PSU banks? I mean, PSU banks are cheap. Credit growth is strong, but they are also struggling. They are struggling because they are not getting deposits and losing talent. They are also not the first port of call in terms of technology and customer experience.
You have seen how they manage their market share. CASA ratios are strong and from the managements, which I have met, PNB and Can Bank said they are sitting on cash. Look at the type of credit growth; plus they have taken a large part of the market share in the credit side on the retail side. They are also doing extremely well on the MSME side. It is a whole basket.
These stocks were underperformers for five years. Now, they have been through this consolidation. But given that now technology has taken away costs, pension funds are seeing less people on the floor and I think that their reach has spread to many cities or towns, you will be amazed at the branch network and the facilities now.
There is a new realm of how people have changed. Look at how Bank of Baroda and the others have started to change into the timeline of private banks. So, no two ways. If you are looking for wealth creation, PSU banks are going to continue to do that at least in the next two years till we see some wave of NPA cycles which will be there in hindsight. But right now, on a valuation basis, the book, the CASAs, are all giving very good entry points.
