Dec 19, 2012, 05.35 PM IST
The finance ministry approved the banking amendment bill yesterday. The bill offers RBI some important regulatory powers to issue new banking licenses. CNBC-TV18 spoke to SP Tulsian of sptulsian.com to know more about the issue and why IDFC is a favourable choice for the banking licence.
SP Tulsian of sptulsian.com doesn't see the Nifty going beyond 6,000 mark in December series.
"I am expecting the last three days to be quite range bound,” he said in an interview to CNBC-TV18. The upmove seen in the market may continue tomorrow and then weakness may start creeping in by Friday, he added.
Below is an edited transcript of Tulsian's interview on CNBC-TV18
Q: How are we likely to close up the year, will it be more of these stable sessions or we may see a bit of a rally towards the 6,000 mark or maybe even on downside towards 5,800 mark?
A: I am maintaining my view that we are not likely to see beyond 6,000 in this series. Probably the up move may continue till tomorrow and then we may see some weakness or some profit booking or some tiredness on Friday and then thereafter we have three days of the expiry in the next week, Tuesday being a holiday.
So I am expecting the last three days to be quite range bound because by then you will not be having any activity and things will be quiet. So maybe a level of 6,000 and beyond is not expected.
Q: How is the market reaction regarding IDFC and perhaps the banking license because the management previously indicated that they are not looking to apply for a banking license but that stock is up close to 3 percent?
A: I am not too optimistic on IDFC getting the banking licence. Even the government may not be too much interested because then the banking space will be crowded. It will also be prudent on part of the RBI to look for issuing new licenses to the private sector rather than to the public sector. Coming specifically on IDFC, I do not think that there has been any reason for the stocks to move up purely on this theme.
We have seen the stock moving up by 35-40 percent in the last three-four months and infrastructure financing seems to be the right theme. Gradually, the company can keep moving up in the same sector. The positioning that we have seen for HDFC in the housing finance, similar thing can happen for IDFC maybe in the next five-seven years. I do not think that management will be too serious in giving a thought to convert itself into a bank because the infrastructure financing continues to be their theme and they are likely to continue focusing on that only.
A: In case of OFS, the homework has been done by the investment bankers. Generally the prices are lower than the prevailing market price. In such a situation I do not find that there is any kind of problem. Even now the retail investors have started taking interest and there have been a lot of enquiries.
I am not saying that they acquire the major chunk of the OFS of any company, but I do not think that the situation is very bad because even the investment bankers have got used to that value or put the pricing of about 3-4 percent. If you put that kind of arbitrage positions on the table, there are takers and if you see the price behaviour of Reliance Power, it has been ruling in a very tight range of Rs 95-105. All the indicative offers which have come, maybe sub Rs 96.
There is very limited downside risk and the chances are there that the acquirer make a profit of 4-5 percent in next one-two months because power sector, hereon, is likely to see better days because of the government clearances and the positive bias building up on the overall sector. This is because many stocks like JSW Energy , Adani Power , Tata Power are gradually moving up. This is very much in line to the response that we have been seeing for RPower.
A: I am not keeping a positive view on the stock. A few months back, we saw them acquiring the asset which turned out to be quite expensive. So I am not too excited with that newsflow. The stock is likely to trade in the range of Rs 255 to Rs 275 because now we are at the fag end of the financial year, Q3 is coming to an end. Again the subsidy burden by the upstream companies will come in the way. Unless we have clarity on that, I do not think that anybody will take much interest in the stock. So maybe a range bound move is likely to continue.
Narrow range movements in Nifty suggest consolidation; another big move is coming soon, maybe on Thursday, almost certainly by Monday December 9
After two days of strong up moves, a consolidation was expected. That has come about. We suggested closing long positions in the Nifty, a trade that gave 100 points. We can expect markets to expand soon enough. Expanding markets suggest big moves. Therefore, the next few days should provide trading opportunities.
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