Dec 19, 2012 05:35 PM IST | Source: CNBC-TV18

Nifty unlikely to go beyond 6000 in Dec series: SP Tulsian

The finance ministry approved the banking amendment bill yesterday. The bill offers RBI some important regulatory powers to issue new banking licenses. CNBC-TV18 spoke to SP Tulsian of sptulsian.com to know more about the issue and why IDFC is a favourable choice for the banking licence.

SP Tulsian of sptulsian.com doesn't see the Nifty going beyond 6,000 mark in December series.

"I am expecting the last three days to be quite range bound,” he said in an interview to CNBC-TV18. The upmove seen in the market may continue tomorrow and then weakness may start creeping in by Friday, he added.

Below is an edited transcript of Tulsian's interview on CNBC-TV18

Q: How are we likely to close up the year, will it be more of these stable sessions or we may see a bit of a rally towards the 6,000 mark or maybe even on downside towards 5,800 mark?

A: I am maintaining my view that we are not likely to see beyond 6,000 in this series. Probably the up move may continue till tomorrow and then we may see some weakness or some profit booking or some tiredness on Friday and then thereafter we have three days of the expiry in the next week, Tuesday being a holiday.

So I am expecting the last three days to be quite range bound because by then you will not be having any activity and things will be quiet. So maybe a level of 6,000 and beyond is not expected.

Q: How is the market reaction regarding IDFC and perhaps the banking license because the management previously indicated that they are not looking to apply for a banking license but that stock is up close to 3 percent?

A: I am not too optimistic on IDFC getting the banking licence. Even the government may not be too much interested because then the banking space will be crowded. It will also be prudent on part of the RBI to look for issuing new licenses to the private sector rather than to the public sector. Coming specifically on IDFC, I do not think that there has been any reason for the stocks to move up purely on this theme.

We have seen the stock moving up by 35-40 percent in the last three-four months and infrastructure financing seems to be the right theme. Gradually, the company can keep moving up in the same sector. The positioning that we have seen for HDFC in the housing finance, similar thing can happen for IDFC maybe in the next five-seven years. I do not think that management will be too serious in giving a thought to convert itself into a bank because the infrastructure financing continues to be their theme and they are likely to continue focusing on that only.

Q: Any thoughts on Reliance Power and the offer-for-sale (OFS) being fully subscribed?

A: In case of OFS, the homework has been done by the investment bankers. Generally the prices are lower than the prevailing market price. In such a situation I do not find that there is any kind of problem. Even now the retail investors have started taking interest and there have been a lot of enquiries.

I am not saying that they acquire the major chunk of the OFS of any company, but I do not think that the situation is very bad because even the investment bankers have got used to that value or put the pricing of about 3-4 percent. If you put that kind of arbitrage positions on the table, there are takers and if you see the price behaviour of Reliance Power, it has been ruling in a very tight range of Rs 95-105. All the indicative offers which have come, maybe sub Rs 96.

There is very limited downside risk and the chances are there that the acquirer make a profit of 4-5 percent in next one-two months because power sector, hereon, is likely to see better days because of the government clearances and the positive bias building up on the overall sector. This is because many stocks like JSW Energy, Adani Power, Tata Power are gradually moving up. This is very much in line to the response that we have been seeing for RPower.

Q: Any view on Oil & Natural Gas Corporation (ONGC) with regards to Rosneft, the Russian company that is possibly bidding for exploring two blocks together?

A: I am not keeping a positive view on the stock. A few months back, we saw them acquiring the asset which turned out to be quite expensive. So I am not too excited with that newsflow. The stock is likely to trade in the range of Rs 255 to Rs 275 because now we are at the fag end of the financial year, Q3 is coming to an end. Again the subsidy burden by the upstream companies will come in the way. Unless we have clarity on that, I do not think that anybody will take much interest in the stock. So maybe a range bound move is likely to continue.

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Q: What is happening with south based realty names like Nitesh Estates, Brigade Enterprise? Both of them are up above 15 percent; is it just the trader interest or have things also changed on the ground for them fundamentally?

A:Things have changed fundamentally or on the ground level, because if you see the off-take which has been happening in the Bangalore property market, things have really started picking up in the last 2-3 months. Since they are all late entrants, Nitesh joined this party maybe in the last 3-4 days while Brigade has been there. If you see the kind of run up they all have shown, a 45-50 percent increase in the share price in these last 2-3 months.

The kind of fate which we have seen for Kolte-Patil, the stock is settling at a level which maybe around Rs 130-Rs 132. Similar fate is likely to happen with these stocks. I will throw a caution that maybe Nitesh Estate being a low price stock, traders find it interesting to venture into that, but will keep my cautious stance on all the real estate stocks whether it is Brigade, Nitesh or Prestige Estate.

Q: Any view on JK Paper and the buzz with regards to an international company acquiring some amount of stake? Would you give it any credence and play into that story for that stock?

A: No. I won’t give any credence, JK Paper has been on an up move of about 5-6 percent since morning. The moment there is an increase in paper stocks, people try to connect that with acquisitions to buy international paper but I don’t think that is likely to happen. Even if for some reason the acquisition happens, the stock valuations can also go in three digits. I won’t be trying to speculate on this.

Yes, one can still keep the hopes alive on West Coast Paper because there are chances because the promoters of that company have taken steps to sell the real estate in Rama Newsprint, associate company of West Coast Paper so I won’t be giving any credence to the news that JK Paper is looking to sell or the promoter of JK Paper are looking to sell their stake to international paper.

Q: What are you planning to do with an Indraprastha Gas Limited (IGL) stock? IGL versus Petroleum and Natural Gas Regulatory Board (PNGRB) case has been postponed quite a bit, nearly about three months now. How do you expect the stock to move?

A: March 18, 2013 seems to be the final day because four weeks back Supreme Court had ordered that all the affected parties should be included to this. So that Supreme Court can hear all of them together. They must have also filed their affidavits and their grievances in the matter and this was expected that hearing will not happen today.

I am expecting that March 18 will be the date on which the matter will be heard by the Supreme Court, but till then I don’t think that there is much downside because IGL has a strong case and have strong chances of continuing to keep their orders alive which they got from the Delhi High Court. We are going to see the real up move in the stock but till then I won’t be surprised to see the share falling at around Rs 250. However, Rs 245 looks like a strong support for the stock. Maybe one can expect a price of Rs 245-265 to trade in the next three months or so.

Q: What is your view with regards to defensives at this point in time because besides Lupin, Sun Pharma is the top gainer on the Nifty which is up 4 percent; is that a new high for the stock? We have Asian Paints which is up around 3.5 percent; is that too seeing a lot of attraction in the past couple of days?

A: For the last 5-7 years, we always see at the year end that all these blue chip stocks start moving up, there is something related with the portfolio holding, value increase or maybe to increase the promoters worth.

If you see Sun Pharma, Asian Paints they are all in the same category. Coming specifically on defensive, I don’t think that pharma is perceived now as a defensive sector. In fact, it is all moving on individual stock to stock views. Earlier, we saw this kind of activity in Strides Arcolab, Wockhardt, Ranbaxy and Glenmark Pharma, but now they are pausing. Some profit booking has come in and now we are seeing that Sun Pharma, Lupin and Aurobindo Pharma, is quiet for a couple of days. They have all participated largely on the basis of the newsflow. So, maybe this momentum should continue for the next couple of days and then should take a pause.

Q: On the back of the Gujarat elections, are you betting on any companies? If yes, how much of an impact will it have?

A: Maybe a few stocks. Adani Group stocks will definitely remain on the radar and one can keep an eye on Adani Enterprises, Adani Power, Adani Port. Even I will be eyeing Essar Oil and maybe a few Gujarat State Government stocks like Gujarat State Petronet Limited (GSPL) and Gujarat Mineral Development Corporation (GMDC). So, maybe a few of these stocks are likely to behave better going forward.

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