Feb 14, 2013 08:22 PM IST | Source: CNBC-TV18

Market likely to trade firm until Budget: SP Tulsian

Commenting on the sudden profit booking seen in our market, SP Tulsian, told CNBC-TV18 that it could be due to issues of corporate governance, confidence crisis, non reliability of financials, pathetic results posted by infrastructure companies and some other things.

In an interview SP Tulsian, spoke about his reading of the market and the road ahead. “From Monday onwards I am taking a positive view on the Nifty and that market is likely to trade firm till the Budget,” he told the channel.

Also read: RBI may cut rates in Mar; inflation figure positive: Kotak

However, he believes overall things are not as bad for quality stocks, although the caution for low quality midcap stocks continue.

Talking about stocks, he thinks Tata Motors stock could correct to about Rs 285 and Hindustan Oil Exploration Company (HOE) could correct to about Rs 80.

Below is the verbatim transcript of his interview on CNBC-TV18

Q: What would you attribute this sudden profit booking that we have seen for our market? What do you think is gone wrong for today in particular for us?

A: It is more to do with the confidence crisis and the issues of corporate governance, non reliability of the financials or maybe the act of the promoters and the pathetic results having posted by the infrastructure companies in this last three or four days. That is the reason we are seeing the carnage or maybe profit booking or the exit from the mid-cap stocks.

Obviously, when you have these things people sometimes exit from all the stocks. If they incur huge losses in this mid-cap or maybe the low quality mid-cap stocks, they tend to offset that by booking profits in the larger ones also. So, this effect of the weak outlook on the mid-cap stocks or the low quality stocks may remain for a while, maybe for next two three days but then things will subside because beyond a point even you cannot see them going down further.

Overall things are not as bad for the quality stocks or for the long-term stocks but the caution and pessimism continues for the low quality mid-cap stocks.

Q: For the Nifty, now since earnings are pretty much over, do you think we are pretty much going to be in this consolidatory trend up till the Budget or do you see some amount of movements? What are the triggers that we can expect in the next 15-20 days?

A: I was expecting Nifty to rule firm, largely on the hopes that the results will not be as bad. However, we have seen good amount of pessimism or dull results coming in this quarter which are coming to an end by tomorrow. Tomorrow being the last day of the week also, I hope that things will again start building up on a positive note, largely on the hopes of the pre-Budget rally kind of expectations. Still people are not talking of any kind of expectations either on the negative front or on the positive front from the Budget.

From hereon, I am not expecting much downside. Keeping my positive stance on the Bank Nifty because State Bank of India (SBI) results was the last straw and hereafter you don’t have any kind of fear because you have seen the results of all the PSU banks coming in. So, maybe the PSU banking stocks all have bottomed out be it Canara Bank, bank of Baroda (BOB), SBI, Punjab National Bank (PNB). From Monday onwards I am taking a positive view on the Nifty that market is likely to trade firm till the Budget. 

Q: Just a quick word on Tata Motors and what are you penciling in, in terms of expectations for today?

A: I have not estimated the profits, but going by the market trend or going by the stock price movement, I have been keeping my cautious stance because the domestic operations are going to see quite a big dip.

If you go by the share price pattern as well, the stock has been struggling to move beyond Rs 310-315. So, may be after the dull Q3 numbers, which are expected from the company the share price may correct to about Rs 285 or so.

Q: Any thoughts on Hindustan Oil Exploration Company (HOEC) and what they have delivered this quarter around?

A: It was a disappointment. The impairment loss, which they have provided, has made the results very scary. For about the last three months, since the news died down that no stake sale is likely to happen, the stock has been witnessing exit maybe on the trading account as well as on the investments account.

I don’t think now any kind of positive bias continues to remain on the stock. The stock can correct to about Rs 80 where we may see the renewed interest coming back into the stock.

Q: Did you manage having a look at LIC Housing Finance numbers?

A: If I see the sequential number, I agree the on year-on-year basis you may find it a little difficult, but on a sequential basis the drop is not so much if you see the profit after tax (PAT) number. Definitely there is disappointment but sometimes the kind of correction, which we see into the stock price it is very difficult to correlate. To give an example of State Bank of India (SBI) and Tata Steel, both have posted disappointment but we have not seen the kind of corrections what we are seeing in LIC Housing Finance.

Sometimes you feel that may be these three-four stocks like LIC Housing Finance, REC, PFC, even though power finance companies PFC and REC have posted good numbers but even they are witnessing the correction. So, these three, four stocks move in a typical way that in spite of any negative news the stock gets corrected. So may be the share can settle or get corrected by about 4-5 percent again and then we may see the interest coming back. On a sequential basis, I am not so much disappointed with the numbers of LIC Housing Finance which warrants this kind of correction.

Q: Your thoughts on Suzlon Energy which has seen quite an intraday spike, any thoughts on that one?

A: It is really strange, but I do not think that one can really expect any surprise from the numbers. The loans have all been restructured, so maybe some adjustments, interest reversal or something may have happened because they have got the rebate of about 3 percent on the interest rate also. So maybe the exceptional things will get booked in this quarter by the company but that should not be construed as an improvement in the company’s operations or the margins.

Overall, I have been keeping my positive stance but the stock has been witnessing profit booking for last one week. It corrected from Rs 26.50 to as low as Rs 22. So maybe one has to now wait. The sudden spike can only be attributed from the expected results which are due by this evening.

Q: Your thoughts on Gas Authority of India Limited (GAIL) and what we can expect today?

A: I have not taken a look at the company. Generally, I have been refraining from taking the quarterly call on these oil marketing companies and the upstream companies. However, because the subsidy upstream sharing burden got reduced in case of GAIL and it has increased in case of Oil India. We are going to see the lower burden of the under recovery by GAIL. So, hopefully they should be able to post better numbers.

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