Market to regain upward momentum from Wed: SP Tulsian

He further adds that the Bank Nifty will come down to four digits soon, after which it will “settle at a realistic level where the renewed buying interest in the Bank Nifty may emerge.”

Below is an edited transcript of his interview with Udayan Mukherjee and Sonia Shenoy. Also watch the accompanying video.

Q: Today Sterlite and Sesa Goa will react to the news and the ratios. How would you approach these two stocks now?

A: I think Sesa Goa will correct by about 7-8% and it should trade closer to around Rs 200-205. We know that the swap ratio or the merger ratio for Sterlite Industries is out, so Sterlite Industries does not have its own leg to price discovery. The swap ratio of three shares of Sesa Goa for five shares of Sterlite works out to about 60% effective valuation of Sesa Goa price.

Always the merged entity rules at 5-8% discount because the whole process of merger may take about four to five months time. So one can always take the price of Sterlite Industries at 56% of the valuations at which Sesa Goa will rule. Since the merger is seen to be quite disappointing and not in the interest of Indian shareholders, Sesa Goa should rule at around Rs 200-205.

Q: You have been talking about the possibility of a correction. Are you looking at March as the possible series where that correction might actually occur?

A: Actually I have been taking a call that the Nifty is likely to correct at 5200, but that I was expecting in the February series. I am actually worried about only today and tomorrow, because I am expecting the market to move up from Wednesday and I am expecting the rally to continue.

The only caveat or the only caution is the UP election results, which should not really spoil the party. But otherwise I am expecting market to be positive from Wednesday till at least the Budget.

Q: Do you agree that the Bank Nifty might correct more?

A: I have taken the Bank Nifty as a trigger for the Nifty to correct because the kind of run up which we have seen from 8,000 at a closing of December expiry and going as high as 11,000 had no justification and profit booking had to come. Maybe the Bank Nifty will to cool down to four digits, around 9,900, and from there on I think it should really derive its fair value.

So my call is that probably for next two days I am seeing weakness in the Bank Nifty, which may even continue more a day or so. Then it should settle at a realistic level where the renewed buying interest in the Bank Nifty may emerge.

Q: Do you expect any excitement in fertilizer stocks because of the in-principle nod that has been given to the new investment policy?

A: Yes. It looks like Chambal Fertilizers will be the largest beneficiary, and we may see some interest in RCF because those are the potential companies which can really go for the new capacity additions. Maybe even GSFC, but I don’t know whether the things will really be positive at those ends also. But yes, Chambal Fertilizer and RCF will definitely be on the radar.

Q: Do you expect it to be a severe reaction on Sesa Goa or will it not fall that much?

A: I have a target of Rs 200-205. I have not been able to calculate because I was expecting 8-9%, but in the absolute numbers I expect it to rule at Rs 200-205. It shows that it is giving that kind of indication only because I did not know what was the closing on Friday. But I don’t think that it should really rule above Rs 205 for major part of the day. I won’t be able to take an hourly call on that.