May 29, 2013 07:09 PM IST | Source: CNBC-TV18

Bank Nifty signals bearish tone; bet on NCC, HDIL: Experts

Market experts say that the Bank Nifty has indicated that the bourses will be bearish on Thursday and advises investors to bet on NCC in the short-term and HDIL in the long-term.

The Sensex fell 13 points to end the day at 20,147, and the Nifty fell 7 points to close at 6,104. Sudarshan Sukhani of s2 analytics says that the Nifty offered no trade.

"The fall indicates that the market did not sustain at higher levels. But the decline is not indication enough to say that up trend is over. It is one of those days when traders have to look to the market for guidance. The Bank Nifty has indicated that the market may turn bearish. The Bank Nifty had a narrow range on Tuesday and witnessed a decisive breakdown today," he said. 

In an overview of the entire earnings season, Dillip Bhat of Prabhdas Lilladhar says, "It has certainly been a mixed bag among the frontlines. Private-sector banks have stood out as PSU-sector banks lag behind on core operational problems. By and large, none of the frontline companies have given a clear signal that the overall economy has picked up."

He adds, "Infosys continues to remain on of my favourite stocks. Though I wouldn't play the stock at current levels, but over the next three-to-four quarters the stock has the potential for 20-percent upside. Coal India comes next on strong results and high cash reserves. Though the pharma segment is a mixed bag, I would still pick Ranbaxy which looks pretty good from current levels followed by Larsen and Toubro (L&T) from the infrastructure sector."

SP Tulsian of is not impressed either by the Jain Irrigation's earnings or the management's commentary. "The Rs 42-crore PAT fails to assure investors and absence of any reduction in the Rs 3,400-crore debt is also worrisome. The company also continues to pay an interest of over Rs 100 crore every quarter which is cause for concern. Though the pick-up in the company’s high-agri-intake-product segment is a silver lining, its benefits will be seen on when it impacts earnings by pushing margins higher and causing a reduction in debt.  The stock probably may not correct further and a bottom of Rs 62-63 is seen to be in place."

Tulsian says it is "unfortunate" that the JP Infra stock is at such pathetic valuations despite selling land parcels and developing real estate at a rapid pace. "The company will be able to quickly repay the over-Rs 7,000 debt that it availed for the Yamuna Expressway by monetising a part of its land parcels. The lack of management initiative and the OFS hangover are clearly a negative. Once the OFS goes through, I will be positive on the stock and expect the stock to move to Rs 44-45 maybe in the next one month."

HDIL has been adversely impacted by an exceptional loss in this quarter which caused a net loss of Rs 280 crore. Tulsian clarifies that the company was forced to declare a loss only due to am exceptional item of Rs 442 crore. "The company has always enjoyed an operating profit as high as 90 percent. However, the company’s debt position is cause for alarm. The company’s quarterly interest burden amounts to about Rs 200 crore and of this Rs 180 crore is paid for project specific interest costs and Rs 20 crore for general interest costs."

On news that Mumbai International Airport Ltd (MIAL) has served a termination notice to HDIL for a slum rehabilitation project, Tulsian adds that the deadlock between GVK Power and HDIL on the project was expected to end. "Though it is a negative, I don’t the impact on HDIL will be severe. I don’t think that this litigation with MIAL will be prolonged as the GVK Group is in dire need of funds. So, I am positive on the stock."

On Sun TV, Tulsian says that inspite of the scheduled OFS, the stock continues to rule at the same price. "Though Sun TV offers a good entry levels, the stock witnesses profit-booking the moment it touch levels of Rs 450 and finds support at Rs 415-420. If the OFS is sufficiently subscribed, it will be seen as a positive could make the stock move to levels of Rs 445-Rs 450."

Tulsian is not positive on National Fertilisers Limited (NFL) on an unimpressive financial performance and the failure of  three of its plants operating on naphtha to resolve bottlenecks.

Coal India has moved up for the second day. "Though I was positive on strong results declared on Thursday and gave a target of Rs 325-326, the OFS overhang prevents a long-term positive call on the stock. Unless the OFS goes through smoothly, I don’t think there is any upside in the stock beyond Rs 335."

DLF is to declare earnings on Thursday. The stock was a favourite in February and March after the aggressive guidance from the management. Tulsian advises investors to remain cautious due to the time lag in the real estate sector for strong sales to reflect in the books and finally allow the company to book profit. He is positive on the stock as it corrected from Rs 245 to Rs 210. "Investors can take a long position on the stock for the June series even if the results disappoint and stock corrects to Rs 205."

From the host of companies to declare earnings on Thursday, Tulsian advises investors take a call on ONGC and Tata Motors based on the results that are declared. "Some of the midcap stocks that I will be a keeping a close eye on are JK Lakshmi Cement and Anant Raj Industries."

On the infrastructure sector, Tulsian suggests investors, from a short-term point of view, to look for opportunities in very low priced stocks. "My first pick is Nagarjuna Construction Company (NCC)  followed by IRB Infra. These two stocks can be looked at with a view of about two-to-four weeks. It has always been safer to buy them when they correct because you don’t have too much negative bias building up. These stocks could be sold when they move up as and when the market stabilises or trade is dull."

Financial Technology, which witnessed a big run-up on Wednesday, is under a bit of pressure today. "In a horizon of 12 months, the stock has the upside potential to move to levels of Rs 950-1,000. But over the short-term i.e. during the last 15-20 days, the stock has been seen to suddenly go up by 4-5 percent and cause trading positions to build only to sharply correct. So, keep a range of Rs 800-805 as a buying level and look to exit at the level of Rs 850 and above," says Tulsian.

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