In an analysis of the stocks that stood out during the day's trading, market analyst SP Tulsian of sptulsian.com tells CNBC-TV18 that of the well-performing aviation stocks, Kingfisher Airlines offers the maximum reward to investors and traders. Tulsian also picks UCO Bank among the winners in the PSU bank segment.
Below is an edited transcript of the analysis on CNBC-TV18. Also watch the accompanying video.
Q: What do you think is causing this optimism in cement?
A: It is difficult to take a call on the moves of the cement stocks due to the approaching monsoon. Traditionally, cement stocks have never been in the limelight. There are also chances of the hangover of the CII orders turning a dampener for the larger cement stocks.
Last week, India Cements corrected on news of Jagan's arrest by the CBI. The only reason for this upside could be technical in nature. The shorts in ACC, UltraTech Cement and Ambuja caused the stocks to take a beating, but the trading grip seems to be quite strong in the case of Ambuja and ACC Cement.
Q: Aviation stocks posted a huge move and the month of June has been constructive for some. Jet Airways has moved up from Rs 300 to 375 in less than a fortnight. Would you expect to see more of an upside in this space and any stock that you would pick?
A: The aviation sector seems to be the immediate beneficiary of any regulatory or any government relief. The government has accorded priority for relief to two sectors - multi-brand FDI in multi-brand retail and aviation.
Apart from the rumble of FDI, a slew of relief measures have been planned for the aviation sector such reduction in the infrastructure charges at the airports, excise duties and levies on aviation turbine fuel.
But all these measures if implemented by the Prime Minister's Office will create an impact only if investments flow into airports. But the financial performance of the four airports - Mumbai, Delhi, Bangalore and Hyderabad- operated by private parties is dismal and I don’t think anybody will come forward.
So the government has to take the initiative on a considerably large scale including granting of sops. In a recent statement, Naresh Goyal of Jet Airways announced that he was open for FDI in the aviation sector.
Kingfisher is also loaded with news of initiative by the management towards repayment of debt.
So a combination of news is keeping these stocks alive. But I will keep my reservations on Jet Airways because I don' think the stock can move beyond Rs 400 and Spice Jet looks to be best on a fundamental basis. But on a relative performance, I think Kingfisher Airlines will be able to reward the maximum to short-term investors and trades.
Q: What is the market's expectation on a cut in rates? Earlier, there were expectations of a 25 bps cut but now there is talk of a 50 basis points in CRR and repo….
A: A cut is expected on both CRR and repo. The CRR, in my view, should be at about 50 bps. The fight for liquidity that will be set off by advance tax payment on Friday will force the RBI to go for a 50 bps cut on CRR. It's difficult to take a call if a similar cut will be seen in the repo rate.
Q: A lot of the smaller public sector banks such as Allahabad Bank and UCO Bank have done very well today. In this frenzy of the expectation over rate-cuts if you had to go with one from a trading perspective, which one would you choose?
A: I will go with UCO Bank though Andhra Bank looks very good after having corrected from over Rs 200.
Q: What is your comment on Sterlite? The stock been moving consistently for a week now. Do you expect any upside in Raykal Aluminum on news of a sale of stake?
A: Sterlite's price doesn' have the strength to move on because when the merger was announced in a ratio of three shares for five shares, it moved in tandem with Sesa Goa.
For the last 15 days, there is a good play of arbitrage based on this swap ratio of 60%.
Sterlite was to rule at 56-57% of Sesa Goa, but in reality it has been ruling at around 50% or maybe less than of Sesa Goa. The good arbitrage play lured traders to initiate buying in Sterlite for the last maybe about three to four days.
Q: BPCL is one stock which has been moving well on the back of gas discoveries. How much more upside do you see?
A: I think it has a lot of advantages. Softening crude could take the share to about Rs 760 before profit-booking comes into the stock.