In an interview to CNBC-TV18 SP Tulsian,sptulsian.com says he is positive on infrastructure, media and cement.
Below is the edited transcript of his interview on CNCB-TV18
Q: How would you be approaching this market from a tactical perspective if we did move another 100-150 points?
A: If you are an index player, then I don’t think that there is any point in taking long positions beyond that 100-150 point. Since you referred to a 100-point rally, I will restrict that 100-point rally in context to the Nifty. So that will take the Nifty to about 6,100-6150 or so. Since the Spot is already at 6000 and Future is at 6050, I have been taking a call of 6,150 on the Nifty Future by middle of January. So is it ruled out that as a tactical trader, I will remain away beyond those 100-150 points.
Looking at the Bank Nifty, the kind of grip we are seeing seems to be quite positive going forward from hereon. I don’t think that any other indices be it IT or other indices there is any kind of attractions seen. But going forward it is very essential in view of the Q3 numbers that you need to pick and choose on the expected better numbers from the companies which are likely to post the results for Q3.
Sector wise I am keeping my positive stance on infrastructure, media and cement. These three are the sectors which are on my radar because from hereon things can give a very good upside, as high as about 10-15 percent. In the small price shares which are ruling below Rs 50 the appreciation can be seen at about 15 percent in this month. One has to have more stocks specific. After a run of about 100-points or more, I don’t think sector and Nifty strategy will work in this market.
A: Generally, we see these kind of stocks participating in the rally when you take a call on the infra stocks but I am not convinced on both the above mentioned stocks. Taking the case of HCC; their core business has not picked up and it is not possible to focus our view only on their Lavasa project. Sometimes, we get excited with the kind of orders they keep receiving but we have to see the kind of margins they are reporting in their working. We do not have any comfort coming in from their future projects or in respect to their future financial performance.
The same thing holds for Gammon Infra also. So, I don’t think that one can take a secular call on these stocks that this rally will sustain. I would rather be more comfortable on stocks like IVRCL,NCC or maybe stocks like Lanco Infra where the monetization of the build-operate-transfer (BOT) projects, power projects. One can eve can add names like Gayatri Projects, Ramky Infra. These are better because they have their core business in place. Apart from that the monetization and debt reduction is taken up by the management in the foreseeable future. I would not be too comfortable with the stocks like Gammon and HCC for a longer horizon.
Q: Have you taken a look at the move on PC Jeweller, a lot of analysts thought that the fair value of the stock at best would be at about Rs 150 or so, is this just speculation?
A: Even I have the same view even I don’t think that the fair value is more than beyond Rs 150-155. Actually at the time of listing only it was expected that probably we will see momentum play. The kind of news flows from the market that this share will get rigged up and the kind of momentum that we saw Tribhovandas Bhimji Zaveri (TBZ) may get repeated.
It is very difficult to take a call whether those things will really happen or not. But on a fundamental-basis, I don’t think that one give a value of beyond Rs 155-160 on the stock.
Q: What are your views with respect to a couple of these corporate debt restructuring (CDR) candidates – the likes of Royal Orchid, Tulip Telecom, even Varun Industries? A lot of them have been hitting upper circuits, anything there that you would put your money in?
A: All are largely due to the trading pattern; Tulip Telecom has been hitting lower circuit for so many days and maybe the stock comes to a value where you again start seeing some value. Similar is a case with Varun Industries.
One really needs to take a call on the credibility of the promoters because about a year back Varun Industries had said, in Madagascar natural resources have been found when the share used to rule at Rs 250.
I won’t trust the financials, and even the promoters of both the companies. Maybe it excites the traders when there are these kinds of news flows that the company has gone for the CDR and you see these shares again hitting upper circuit. But that will be for a shorter horizon and maybe in the next 2-4 days, you will again see the stock correcting or maybe correcting back.
Royal Orchid is an asset-backed company and they have the hotel properties at various places. We all know that hotels are not doing well. It has been a tough going for the hospitality industry. So, maybe one can take the value that if they monetise some of the property or if they have some re-schedulement of the debt from the bankers. They have requested for the interest reduction also in the initial year, which can get recouped in the later part of the repayment schedule. So, overall one can take a positive call on Royal Orchid, but I will remain away from Tulip and Varun Industries.
Q: Rate sensitive seems to be the flavour of the moment as we head into the Reserve Bank policy at the end of the month. For the series what rate sensitive stocks would you bet on?
A: It may not be strictly rate sensitive but still if you want to go with that then they are definitely banks and real estate. I am not taking a positive call on the automobiles because I am keeping my negative stance on Tata Motors and stock like Ashok Leyland don’t look good. So, I will distance myself from automobile but will keep the positive stance on the banks and real estate.
Q: How do you move on Gitanjali Gems because it has doubled between January and now?
A: Definitely there is value in Gitanjali Gems because if you see their brand portfolio and their presence then even now after such a big run up share is ruling in a single digit, maybe in the PE multiple of 9-9.5. While we see the new entrants like Tribhovandas Bhimji Zaveri (TBZ) or like the PC Jewellers which are also ruling in the same price-to-earnings (PE) multiple. But what I did not like about Gitanjali Gems is too much volatility is seen in the share. My call is that maybe at Rs 620-625; we will see the stock getting corrected by Rs 60-70 or so. So, that is not very positive for the retail traders or those who are purely traders and not investors.
So, if you need to take some investment call on the stock look for the share to dip maybe at a level of 560-565 where the entry can be made.
A: I like Suzlon because the kind of newsflows which we are expecting from the company, like debt restructuring, then maybe some action will be initiated on the RE Power also. But in the case of Suzlon, we need to have two years view at least and that can reward the investors to a great extent. It is a 5 billion topline company and fifth largest in the wind power energy.
Talking on Pantaloon, the group has been aggressively reducing the debt. We will be seeing some kind of corporate developments happening in that company, so that can give some returns maybe in next two to three months or so.