Market preps for 50 bps cut; gloomy on infra: Tulsian

On political side, he feels that the market is not too worried, disturbed or excited with the president's election but a bit nervous. He feels that it is difficult to predict Mulayam Singh and take him as a loyal supporter of any party.

Below is the edited transcript of his interview to CNBC-TV18. Also watch the accompanying video.

Q: How do you view about the political situation around presidential elections?

A: I have a cautious view. Earlier, Samajwadi Party was looked as a party of confidence by the Congress but now they are not able to have common consensus on candidate. If relations are spoiled then the scar of it will remain for two-three months.

The disturbing news has been the 10% rise in Urea prices. A similar kind of meeting was scheduled 10 days back which did not go through. Hike in urea price is not a cause of worry because this hike will give the government an additional Rs 1,500 crore. Non-consensus and no courage of Congress must have resulted in deferment of the meeting. The total focus of the Congress or the central leadership is on the presidential election, which is very unfortunate.

All other economic matters are remaining on the back foot. So taking all this into consideration market is not too worried, disturbed or excited with the president's election. Definitely, the market wants the economic moves to get implemented, initiated and continuous.

Yes, the market will be nervous. But, RBI can fuel some hopes back into the market by 50 basis point CRR cut and 25 basis point of repo rate cut. Anything below this will be disappointing for the market.

Q: Which infrastructure stocks are more vulnerable now?

A: I have a cautious view on infrastructure stocks. Stocks like GMR Infra , GVK , HCC and Punj Lloyd are really vulnerable. I don't think stocks like IVRCL , NCC and HDIL in real estate are vulnerable.
 
Q: Will Mulayam Singh sideway Mamata Banerjee or go the Congress way as it has important ramifications for how things pan out over the next few weeks?

A: It is difficult to predict Mulayam Singh and take him as a loyal supporter of any party. I won't agree that he will really stick to Mamata Banerjee's side. If you see the equation in West Bengal, a patch up between Congress and Trinamool Congress can happen but it can never happen in UP.

Mulayam Singh has not spelt out the demand for his state and is keeping his cards very closely to his chest. On the other hand, Mamta Banerjee has been very demanding for packages for her state. So, it is difficult to say which way Mulayam will turn. I am expecting a dramatic turn to happen or even a break up with Mamta by evening or maybe tomorrow.

Q: What is your view on HDFC Warrants post Macquarie downgrade?

A: Just going by this one report, I won't take a negative call on HDFC Warrants. The 16% fall is in relation to the share price. Research reports are always not correct. In the past, in case of MSCI also research agencies have erred in taking the foreign holdings at 100% and then they have agreed to rearrange the weightage of HDFC in MSCI.

But, on Macquarie and hearing Keki Mistry he said that the income or the profits of the associates to the extent of Rs 1,400 crore and its corresponding interest liability of Rs 465 crore has not been booked by HDFC. The RoE is boosted by the corporate debts which is a practice of HDFC.

HDFC has been financing to both individual and non-individual and I am unable to understand that mix. Assume there are 50 builders in Bombay and half of them avail their constructing finance from HDFC. So, that necessarily falls into the corporate category. I am unable to understand what the mix is and why that has been a cause of concern.

As Keki pointed out that NPA is higher in case of corporate finance than in case of the non-corporate finance to the individual category. I am unable to accept the price targets. One has to keep a close watch on these reports and developments if any rectifications are carried out by HDFC in their subsequent accounting.