In an interview to CNBC-TV18, SP Tulsian of sptulsian.com has a positive view on the market. He has a target of 6100-6150 on the Nifty. He belives that the markets are looking quite sprightly because Reliance, ONGC, HDFC and IT stocks all have been pulled up.
Meanwhile, Bharti Infratel is ruling at Rs 190, which indicates a bearish view on the stock. From a long term perspective, he recommends investing in Suzlon and expects returns of about 50-100 percent from the current level.
Below is the edited transcript of his interview to CNBc-TV18
Q: What happened with Bharti Infratel and how do you see the stock from here?
A: As expected because listing was expected to happen between Rs 190-200. However, it is still ruling at the lower end of the expectation. If it would have ruled at Rs 200 then the things would have been seen as more reflecting in a reasonable manner. So, ruling at Rs 190 indicates that the pessimism or the bearish view continues to remain on the stock.
The worst part is that we have not seen any kind of participation either from the high networth individual (HNI), or from the retail in the initial public offering (IPO). The same fate is seen here also. Infact we are not seeing much of the volume also. It is such a big issue and the arbitrage is not even happening here. Probably the inclusion in the FTSE may happen of the stock. That will get reviewed today evening after closure of the market and after five days it will get included.
If that happens one can see a slight bump up of Rs 200. However, I am not holding very positive view even on that front. If one sees the total equity, close to about 80 percent is held by Bharti Infra. The rest of the 20 percent float, majority portion of that is as such held by the Foreign Institutional Investors (FIIs). So, there will be a shift. Many would want to exit from the stock which will be taken up or lapped up once because of its inclusion in FTSE, if it happens.
So, even if that event happens which is a bullish move will not be seen very positive. The Indian climate is not very conducive. People are not very much prepared to accept a price-to-earnings (PE) multiple of 36-38. Enterprise value (EV) to earnings before interest and taxes (EBIT) of close to about 8.5-9 times. So, things are definitely looking quite stretched and strangely. We have started seeing some cautious report coming in. We have seen the report of Credit Suisse. Inspite that out of the eight book running lead managers, seven were the overseas investment bankers, those who have managed the issue. So, definitely they will all be there to support and justify their price into the issue. However, definitely that has been aggressive which was opined when the company went public.
Q: How would you approach these oil mark1eting companies now, there is talk of staggered hike. How convinced would you be and where do you see these stocks move?
A: I take this as a wishful statement. Maybe when the ministers meet, they might see it as a compulsion. However, do they have political will and I don’t think that staggered increase of Rs 1 per litre in diesel for next 10 months is going to be feasible. Whether one makes an increase of Rs 1 or Rs 5 the opposition and the dissatisfaction amongst the people will be the same. So, it will not be logical and it will not be that easy that one can afford to do. On the other hand when we are talking that government will be seen populous going ahead of the general elections which may happen in April or March 2014 or it gets proponed I don’t think that this is feasible.
So, this seems to be a short lived positive effect on all the oil marketing companies. This price increase of Rs 1 will be made. When one will sit and take a call on the subsidy obviously Prime Minister and Finance Minister both will see that there is a need to prune this subsidy. However, this is unlikely. So, maybe it is a prudent advice that remains away. One should not dare to enter into these OMCs at a higher level. otherwise this will be a good trap because we may see the profit booking happening in next couple of days or so.
Q: Do you have any conviction to buy Suzlon or would you completely stay away?
A: No, very much I am taking the positive call. SBI has been echoing their opinion about the company for last couple of months that they are very much confident about the business model of the company. They were saying that if the company could merge their 100 percent subsidiary REpower and bring the facility which they have been availing the Indian banks are prepared to lend them inspite of them having an exposure of Rs 11000-12000 crore. It is seen very positive statement in fact that gives the confidence.
The topline of USD 5 billion and the valuation of REpower is taken at USD 3 billion. It is a very good turnaround story if somebody can keep a view of couple of years. The CDR meet is likely to happen either today or maybe in the near term. The promoters have already complied with their condition of bringing in the need based finance or the matching finance by selling the part stake in the company couple of days back. So, if that happens it will be seen very positive and we can see the stock swiftly moving to maybe Rs 22-22.50 in January series. That is my target on the stock. On the longer term if somebody can keep a view of about one to two years the stock can give a very good return of about 50-100 percent from the current level.
Q: Would you have a view with regards to Idea which is off the 52 week high which it made yesterday but at around an Rs 103 odd?
A: I am not finding much attraction in the stock. Maybe a level of Rs 90 seems to be a good entry point largely for the traders. But since my cautious stance remains on the telecom stocks, both including Bharti and Idea Cellular, I am surprised that why stock has moved to about Rs 105-106 levels coming in yesterday. So, whenever we see the rally coming in it doesn’t sustain, it again quickly gets corrected to about Rs 96-97. So, maybe a range of Rs 95-105 can be taken as a near term range but I am not keeping my positive stance. This stock seems to be purely for a trader for a trading gain of about couple of rupees.
Q: What is happening with S Kumars that stock is down around 6 percent today, not to mention it is down 90 percent or maybe 86 percent on year to date (YTD) basis all the way to levels of around Rs 12.7, a penny stock now?
A: That is right and if you see maybe the hopes or maybe the details given by the management, it seems that market is in fact not relying anything on those things whether you talk of the financials, whether you talk of the debt positions. We have been hearing that there have been stress in the or maybe the payments not being made to the supplier and even if you see the financial performance, I am referring to FY12 EPS of Rs 12-13 even that is, it seems that market is not relying too much.
I agree that in the first half of FY13 again there has been a big drop in their financial performance. So, market is very apprehensive in fact they have no t been able to sail through their overseas subsidiaries in fact one of the US subsidiaries has filed under chapter 11. So, I think lot of problems seems to be there. The company seems to be in a big liquidity crunch and inspite of taking a call that probably it has bottomed out at Rs 20, Rs 16, Rs 15 doesn’t seem to be in the place. Penny stock can soon fall into the single digit as well.
Q: The real estate story has played out really well in this year. What are the stocks that you would carry forth into next year if you own them in your portfolio?
A: Many of them have to focus each on a regional player. If I need to take a call on the Ahemdabad then Ganesh Housing. Smaller player in Chennai could be the – there are one or two players in that pocket also. If you go for the Bangalore you continue to take a positive call on Prestige Estate. Probably Brigade Enterprise looks to me as fully priced but maybe Prestige Estate and Nitesh Estate looks good. In Mumbai I will focus more on the Peninsula Land and HDIL because DB Realty seems to have ran much beyond its value and fundamentals. So, maybe one will keep a pause and in the NCR space one can take a call on Unitech and Anant Raj.
Q: Is there any reason why the markets are suddenly looking quite sprightly?
A: There was no reason except for the US cliff. Maybe that fear that something goes negative for the market otherwise I have been keeping the positive stance. As you have rightly said if you really see the heavyweights Reliance, ONGC, IT stocks, HDFC all have seen being pulled up by the markets. So, that indicates that the long position is being made up in these stocks and maybe the long positions on the indices are also being made. So, the positive stance is likely to be getting accelerated from Monday onwards.
Q: Any view with regards to how exactly we could pan out in next week for the markets?
A: I am keeping my positive view because the kind of rally which we have been seeing in all these heavyweights, this is largely happening on the year end. Maybe to increase the value of the funds to show the better performance, for the bonus payments which are linked of the fund managers. Apart from that I have been keeping my positive stance on the January series which will be seen positive at least till middle of January. I am expecting quite better events lined up.
A positive bias happening on the Q3 numbers also which will start with flow of the IT company results. Maybe some expectations start happening from the RBI also on the rate cuts. Once we have this US issues behind us which will happen in next maybe one trading session then we will be seeing the positive so keeping overall positive stance with a target of about 6100-6150 on the Nifty.