In the week ahead, SP Tulsian of sptulsian.com will keenly await the auto sales numbers and the government's decision on the foreign direct investment (FDI). He believes government's suggestion in various sectors is quite positive and can keep the positive momentum on for the market.
From a stock perspective view, with regards to banking sector, he suggests buying PSUs such as Bank of India and State Bank of India (SBI). "If someone keeps a view of one week, they can look for a gain of 6 to 8 percent from current levels in both these PSU banks," he says in an interview to CNBC-TV18.
Below is the verbatim transcript of SP Tulsian’s interview on CNBC-TV18
Q: How do you see the response to the Hindustan Unilever (HUL) open offer? Do you see foreign institutional investor (FII) tendering in this time around and what would be the approach?
A: It will be prudent for the retail investors to tender the stock in the buyback offer because if one goes by the July series Future and Options (F&O), it is already ruling at a discount of Rs 20 at around Rs 565. Those who are possessive can even get an arbitrage opportunity or maybe the investments they are holding, a gain of about Rs 35 or so.
First on Life Insurance Corporation (LIC), we have seen LIC tendering their entire quantity in the buyback offer of GlaxoSmithKline Consumer Healthcare. That same thing will happen by LIC also who are holding close to Rs 4,000 crore because the Indian government will be keen that the entire 5.5 billion buyback offer should get subscribed.
With regards to FII, they will be finding it interesting to tender the shares in the buyback offer largely because of the future prospects. If one takes the company's working, I don’t think market can always be cheerful by the quarterly results.
We see sharp reaction coming to the quarterly results of HUL. If they are not able to post a volume growth of 6 percent, market always takes that as negative. It will not be difficult for the company to consistently do 5-6 percent. If one has a longer horizon of 6 to 8 months, one is bound to see the price of maybe Rs 525 to Rs 540 again coming back to the stock price which can make a good entry point for those who are now exiting from the stock as pursuance to the buyback offer.
I am hopeful that for Indian retail investors, LIC and even FII will be responding but it will be interesting to see whether Unilever will be able to jack up their stake to 75 percent. This is because we have not seen that happening in case of GSK Consumer where they got stuck at 72 percent or so. The threshold of 70 percent can be met by Unilever and I won’t be surprised to see them raising their limit to 75 percent also making the entire buyback successful.
Q: Which are the important events that you would watch out for next week?
A: I will be watching two things. First, the sales numbers from the auto stocks. Considering the price behaviour, all the auto stocks are ruling at the upper end, whether it is Bajaj Auto, Hero Motocorp, Maruti Suzuki. I am not talking of Maruti's old level of maybe Rs 1750 plus, but they are virtually ruling at a reasonably good level.
Second will be the government move on the foreign direct investment (FDI) hikes because it will be interesting having suggested by the government in the various sectors that can be seen quite positive and that can keep the positive momentum on for the market.
Q: Mehraboon has chosen to remain safe and defensive by buying some of the good quality banking names but I see you have a couple of PSU banks on your list. Take us through why would you buy them? Do you think the run on the downside is overdone now and its time for a pullback?
A: Mehraboon has taken a positive view on banking sector but on a relative basis PSU banking stocks are more profitable. The kind of correction that we have seen whether one talks about the large size PSU bank or midsize PSU bank and that is why I have chosen Bank of India and State Bank of India both. Bank of India has corrected from a level of Rs 330 to Rs 230. Similar has been the case for State Bank of India from Rs 2200-Rs 2250 to a level of maybe Rs 1950 or so. Both the current levels are ideal and if somebody keeps a view of one week, they can look for a gain of 6 to 8 percent in both these PSU banks.
Q: You have a couple of real estate counters in your buy list as well – just take us through that and the rational behind putting in money there next week?
A: The kind of beating that we have seen in real estate sector across the board whether you take the Mumbai based real estate stocks or NCR or maybe the southern region, I don't think that kind of beating is really justified. I see good value coming in those stocks at such a lower level. I have picked two stocks, one is from the NCR region that is DLF. The bottom has formed. In fact, a lot of shorts are still pending in the system. The under ownership has happened in many of the investors and holding the delivery in the stock has exited. The renewed buying seems to be coming back coupled with short covering.
Second is Indiabulls Real estate. The kind of correction that we have seen in the stock from Rs 80 to 60 just in a period of one month, but always the volatility or the price behaviour is very swift in case of this stock. I won’t be surprised to see the stock moving back to a level of Rs 70 plus in this July series. But both the stocks on DLF and Indiabull Real Estate, I will advise to keep a view of one week for a gain of about 8 to 10 percent.