Nifty Correction Done, United Spirits, Mindtree Attractive Bets: Sanjiv Bhasin

The weariness in domestic equities seems to be overdone and the markets are likely to bottom out this week as the Nifty heads to the crucial support of 8,000. The buying by domestic institutions over the last two months has been a big positive at a time when foreign flows have been strongly negative. Consensus seems to suggest that the large part of selloff related to money rotating into China and into the US tracking higher bond yields seems to be over.

The key factors favouring return of flows to India are as under:

1. Too much weightage is being ascribed to deficient monsoon

2. Slow but sure improvement in economic growth

3. Reserve Bank Governor has clearly indicated that there could be another rate cut in July/August if monsoons are normal.

4. Rupee has weakened, but it has found support at 64 per dollar

5. Valuations have become attractive after recent correction and offer good risk-reward to investors

6. The carnage in midcaps and volatility because of weak earnings season is behind markets

Technically, the Nifty has seen lower top & bottom formation, which indicates that 8,000 could be under threat. A breach of 8,000 however could attract value buyers. From Thursday, the Nifty should have bottom out for the month of June.

Here are the large cap picks:

1. United Spirits: Rumours of overseas buyout of Diago will keep the counter see strong action. Accumulate around 3,450-3,500 for target 3,750-3.800

2. Bajaj Auto: Q4 results better than expected on strong export turnover in the neighboring countries with expansion in margins. Accumulate around 2,200-2,250 for target 2,500.

3. Coal India: Signing of new fuel supply agreements with non-power consumers at higher than market rates has led to rerating. Accumulate around 385-400 for target 450

4. Maruti Suzuki: Q4 results have been strong, company will also benefit from currency gains. Accumulate around 3,600-3,650 for target 4,000.

5. IndusInd Bank: One of the best private sector banks with strong growth expected in coming quarters in the commercial vehicle segment. Accumulate around 800 for target of 885.

6. Reliance Industries: Gas discovery, pricing, improvement in refining margins, expansion in retail and the likely launch of Relaince Jio could lead to good gains in coming months. Accumulate around 875-895 for target 1,000.

Top mid cap ideas:

1. Mindtree: Has seen excellent performance in last two years on back of strong growth in all BFSI verticals. Valuations are still reasonable. Accumulate around 1,300 for target 1,500.

2. Tata Elexi: Seems best play on digitalization programme of government and corporate India with exposure in certain key verticals. Accumulate around 1,025-1,075 for target 1,250.

3. Union Bank: PSU bank underperformance seems to have bottomed out and we should see much better results going ahead. Accumulate: 145-150 for target 175.

4. Canara Bank: Valuations provide extremely solid risk/reward with dividend yields also extremely attractive. Accumulate around 290-295 for target 330.

5. Voltas: Has been an out-performer in the engineering consumption space. Accumulate around 315-325 for target 355-360

6. Dish TV: Only listed play on direct-to-home. With digitalization seeing strong traction in tier -2 cities, the margins and price increases should sustain. Accumulate around 90-96 for target 120.

Sanjiv Bhasin is consultant (corporate affairs) and member (core strategy group) at Indiainfoline Ltd.

Disclaimer: Investors are advised to make their own assessment before acting on the information