Market shatters, Tulsian picks valuable long-term pieces

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Rocked by concerns of global economy slipping into recession, Indian indices today hit a 52-week low. As investors sold-off their stocks today, SP Tulsian of sptulsian.com selects few bets that have suffered in today's carnage but still hold mettle from a long term perspective.

Amid the dead cat bounce seen in the likes of Suzlon , Indiabulls and DLF , Tulsian is confident on Suzlon's sustainability. On the metal space, Tulsian says, "I will be cautious and apprehensive on the other stocks but the Sterlite Industries definitely looks a good buy at these levels."

He finds no specific reason for a big fall in all the textile stocks. He also says the income tax raids on Educomp and IRB Infra have led to the negative perception that is building on the stock. "It is for this reason that we see a continuous fall or correction in the share price of these stocks," he added.

Below is an edited transcript of SP Tulsian's commnets to CNBC-TV18. Also watch the accompanying video.

On Suzlon, Indiabulls and DLF

I don't see Suzlon going down to the lows of Rs 35, hence, renewed buying interest does come in and that compels the shorts to get covered. In its similar with Indiabulls Real Estate because if people start taking a valuation call that the share has corrected much beyond its fundamental value, it may not hold right in the longer term.

In case of DLF, I hold a different view since we have been seeing short covering at every level. However, ultimately if you see the price pattern of DLF, it is forming the lower bottom at every trading cycle. In the last couple of months the stock has corrected from Rs 250 to Rs 220 and then seen bounce backs. It is on a lower bottom forming pattern, hence it is a complete dead cat bounce.

However, Suzlon is an exception. The reversal of the trend on a sustainable basis can make the stock to move to Rs 45, however, I won't be positive on other stocks.

On textiles stocks

Over the last months, the cotton prices have fallen and there was a crash in the cotton yarn prices, which were seen as positive for the garment makers. However, now the news says that things are not picking up and there is a huge inventory pile up. I don't know whether that can really have such a bad effect on the share price. I am unaware of the specific reason for such a big fall in all the textile stocks across the board today.

Alok Textiles is on a debt reduction process, they are selling their land in Vapi which is fetching them less than Rs 100 crore. In the Peninsula Park they have a tower or about six lakh square feet where they have started leasing out the premises. Hence, it is not going to de-leverage their balance sheet though the management confirmed that they will be realizing Rs 2,000 crore. I am unable to take a call on stocks like Arvind Mills because there has been a huge positive move having built in last one month, since it has gone in F&O.

On IRB Infra

Income tax raid on stocks like Allied Digital saw a sharp correction and it never recovered. Educomp too has been correcting for last one week or so. It is a similar story with IRB Infra. Post the I-T raid people had apprehensions that the company has not been able to maintain the quality or the standards with respect to the other companies. Hence, whether you are a trader or an investor, you feel suffocated if you are invested in these stocks.

Institutional investor's look for the opportunity and the trading bump to get out and this is happening in case of IRB Infra. It may have started with their Ahmedabad and Baroda projects and since then the negative perception has been building up on the stock. This is the reason for continuous fall or correction in the share price of this stock.

On metal space

Tata Steel had the problem to the European exposure. Jindal Steel and Power has been clubbed with the JSW Steel and seen as a negative because of the regulatory concerns or fears. I find good value in Sterlite Industries because large part of its value is derived from the Hindustan Zinc , where they hold about 64%. If you go by their core business, 51% in Balco and their copper business there is not much problem seen in both its business. The kind of results posted by Sterlite and Hindalco on aluminium front is similar to their copper business.

I am unable to connect with the reasons for such a big fall. There is no reason for Sterlite Industries to fall in this proportionate manner. I'll be cautious and apprehensive on the other stocks but the Sterlite Industries definitely looks a good buy at these levels. One can try to look for a bottom and find out a realistic level at which entry can be made. However, this stock holds promise from a longer term point of view.

On capital goods sector

The capital goods sector seems confident. Stocks like ABB , BHEL , Thermax , Cummins or Siemens are unlikely to see much value erosion. One can be selective in buying all but I don't think that these stocks can really fall much from here on. Even if they correct, there are prospects of a bounce back very soon. The three heavyweight sectors - IT, banking and automobiles have taken a beating and in spite of having seen such a big correction in last 15 days or so we do not have any comfort.

However, in the capital goods there is not much erosion or value destruction. Hence, maybe these stocks are looking quite good for making an entry into at these levels, for the investors alone and not the traders.

On Reliance Infra

The company is sitting on a debt close to about Rs 4,000-4,500 crore and there has been no rational move on part of the management. They have been going for buy back and preferential issue; also there is margin erosion in the company. The Q1 results too had the depreciation policy changes.

Hence, there are a lot of concerns but it doesn't need this kind of valuations. The market cap must be close to about Rs 10,000 crore however, no one cares for the fundamental calls at this stage since there are other concerns prevailing in the stock.