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Sep 23, 2011, 10.28 AM IST
Talking about sectors that take such times on the chin, SP Tulsian of sptulsian.com says sugar is one such space that is unlikely to see any fundamental bullishness.
The Federal Reserve's 'Operation Twist', where Fed will be buying USD 400 bn of long-term Treasury bonds by June 2012 and selling shorter-term debts, brought mayhem to the Dalal Street.
Talking about sectors that take such times on the chin, SP Tulsian of sptulsian.com says sugar is one such space that is unlikely to see any fundamental bullishness. "One can take a range of anywhere between Rs 58 and Rs 64-65 for sugar stocks," he says, adding that the sector is dancing to the tunes of the global volatility.
However, he sees no fundamental concern for Reliance Communication at this time. He held that the company's tower business deal can move shares to about Rs 90 to Rs 92.
Below is an edited transcript of SP Tulsian’s interview to CNBC-TV18. Also watch the accompanying video.
Q: Do you think there will be lot more unwinding pressure on the sugar stocks?
A: I don't think that there has been a really considerable long position built. Only four stocks have their presence in F&O — Triveni , Balrampur , Bajaj and Renuka . Bajaj Hindusthan is the victim of its own announcements of the liberal rights issue of 2:1 at Rs 36, which is purely a wealth destruction exercise. I don't think Balrampur Chini has any attraction because the September quarter is going to be bad. They have exhausted the inventory and the turnover cannot really get compared on a quarter-on-quarter basis, so the performance is going to be dull. It is the same scenario for all the other sugar stocks, except for Renuka which more exposed to the global play.
They are all dancing to the tunes of the global volatility of the sugar prices. I don't think it is relevant or justified but whenever the global sugar prices move up, sugar stocks go up and vice versa. There is no fundamental bullishness or any hopes seen in these stocks at least for next two to three months. They are all likely to move in the same range as for Renuka. One can take a range of anywhere between Rs 58 to Rs 64-65 for other sugar stocks.
Q: Reliance Communication yesterday spoke about a valuation of USD 4 billion, lower than the valuation of USD 5 billion, that they wanted for Reliance Infratel through monetization of tower assets. At levels sub Rs 80, what is the Reliance Communication stock actually pricing in?
A: For their tower business, the company or the promoters have been expecting USD 5 billion for the 95% stake. Probably USD 4 billion is offered for the company and it is unclear whether it is for 95% or the entire company or the entire business has been valued at USD 4 billion. The market has factored in a valuation of close to about USD 4.5 billion, which is an average of both.
The concern for the market will be the conclusion of the deal whether it gets inked or not. It is likely to be at USD 4.5 billion and the share can move to about Rs 90 to Rs 92. One must see whether the deal can really get concluded in the next one month or so and if it happens, the share has fundamental valuations of around Rs 90.
Q: The top looser on the Nifty is JP Associates, with the 10% fall. What do you make of it?
A: I see this as a long liquidation. Jaypee Infra and JP Associates have been considerably moving up, over in last one week and in that process lot of longs have been built up. I don’t think that the fresh shorts are really created. There is no element of shorts having created but it is the long liquidation. May be the margin calls are getting triggered because people have taken a positive view on both the stocks because of the increase in the land prices in NCR region, completion of the F1 track, expressway moving ahead of the schedule and all sort of things which are largely benefiting both these companies. Hence, these are main reason of liquidation in the F&O segment.
Q: On a couple of these stocks that have FCCB issues as well like Orchid Chemical , IVRCL Infra , and Bajaj Hindusthan, do you think that there will be an increased amount of pressure on stocks like these because of the repayment issues?
A: Definitely, it is not necessary that all the repayments will fall in the near term or next couple of months or so. Since 2008, we have see lot of stocks getting hammered because of this reason. So, obviously this will resurface — currency or the weakening of the rupee is indeed a cause of concern for them.
Tags: NS, EBSE, Sensex, Nifty, market, 'Operation Twist, Fed, Dalal Street, Reliance Communication, JP Associates, Triveni, Balrampur, Bajaj
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