Avoid fresh buy in Sun TV until mess sorts out: Rajesh Jain

Excerpts from Markets Midday on CNBC-TV18 Watch the full show » ALSO READ See what other experts are saying about markets See what FIIs are saying about the markets See what Udayan Mukherjee is saying about the markets HUL BSE | NSE 31/05/12 Are Mutual Funds betting on HUL? Other Stocks in this news Procter and Gamble Hygiene and Health Care | Sun TV Network | Maruti Suzuki India |

Rajesh Jain, Independent Market Strategist in an interview with CNBC-TV18 answered investor queries. He also gave readings and outlook for stocks like HUL , Sun TV  and Maruti . 

Below is the verbatim transcript of his interview with Latha Venkatesh and Anuj Singhal of CNBC-TV18. Also watch the accompanying video.

Q: Today's buzz about HUL is extremely wild, the newspaper quoted extremely wild buzz doing the rounds that P&G may mount this take over bid - what is your sense how should a HUL investor react?

A: I think extremely positive. We are all aware of the fact that HUL has been attacked on its flanges time and again by Procter and Gamble. Particularly, in the detergent space and then subsequently in the shampoo space.

The net result of this war has been significant cutting of price realizations, very high spend on advertising and value for money positioning of products, a lot of promotions and give away.

If you have your biggest enemy out of the way and he comes over to your side that is to say Procter and Gamble and Unilever come together then a lot of this cut throat competition, price wars will go away. No wonder the market is giving a thumbs up to it.

Caller: I have 200 shares of Sun TV at the Rs 440 & 1,000 shares of Dish TV at Rs 43. I am planning to exit from Dish TV and enter Sun TV is it right strategy?

A: The investor should never commit the mistake of chasing a stock when the price is falling. The reasons for the price fall have a lot to do with politics. As we have seen in the case of ADAG group, DB Realty, you do not know when there will be light at the end of the tunnel.

So the best thing for the investor to do would be to avoid buying anything fresh in Sun TV until the mess sorts itself out. Sun TV has a lot of fundamentals strengths recommending a buying at the current levels which is minus 75 from the top of what it was yesterday. Do not buy Sun TV now when Maran is facing a crisis.

The stock will see substantial bouts of selling from institutional segment. The short sellers in the momentum players in the market will latch on to a news development like this to create substantial shorts. So, that will kept the pressure on the downward direction.

Dish TV is a tremendous buy that this investor has. Just because the investor is at a 2X level in terms of profits made on buy, one should not be in a hurry to book the gains. Normally as a stock market investor you should ride your profits and cut your losses. So ride your profits in Dish TV.

I suspect you have another 50% to be made from current levels, stay with the stock it is on an excellent business role. Exciting things are happening in that space going forward.

As far as Sun TV is concerned I would ideally suggest that should you see a bump up in the stock or a dead cat bounce over the next couple of days you should switch half of your quantity into Dish TV and not vise-versa.

Also Read: Maran is history, will succumb to 2G charge says N Ram

Caller: Investor has 25 shares of Maruti at Rs 1,320. Should I exit here and what is the target if I hold the position? I have a time horizon of three- four months.

A: Averaging at this point is not called for. This is because if you look at yesterday's numbers the core A2 segment has seen a marginal volume decline and you need to see whether this likely to worsen going forward.

There have been problems on margins because input cost have shot up and price increases have still not been able to off set more of that. So, I suspect the Q1 numbers could give you negative indicators on that as well.

On a bad market day the stock has a potential to shave off another 3 to 5% from the current ticker levels and hence averaging at this point is not advised. But, he should exits from the stock, I would suggest no. This is because over the next three- four months I expect Maruti to establish its best pick in the auto space credentials in times of inflation and interest rate.

You will see going forward that this differential will help Maruti to sustain volume growth as well as recoup margins to a larger extent. Making a decision on where the entire auto space is headed before Dassera is going to be fool hardy. This is because the next two months will still see a role on the basis of the booking made earlier.

The impact of price and inflation will be felt only after the Dassera season is over. So no panic selling at this point but certainly no averaging. You might eventually see Maruti outperform and give you a 10-15% return on your acquisition price of Rs 1,325 or so.