Rel Power, Future Cap premiums fall: SP Tulsian

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SP Tulsian of sptulsian.com said the premiums of Reliance Power and Future Capital have got reduced. "Reliance Power is trading at about Rs 150-155 and people are saying the rate is being held on."

 

Excerpts from CNBC-TV18's exclusive interview with SP Tulsian:

 

Q: How would you sum up the sentiment in the dealing room right now?

 

A: Sentiments are at its worst, which we have not seen in a couple of years.  When one tries to recollect the 2006 situation, one finds that sentiments are worse than that.

 

The reason for the losses incurred by small investors or even the broking fraternity is because they are unable to realise the payment. Some of the brokerages have executed the trade on behalf of large investors. That is really a painful process for them. So, definitely sentiments are at its lowest at this stage.

 

Q: What is the situation right now, by way of people having paid their margin requirements? We hear that pay-ins and payouts were smooth today. Are there still some technical glitches being cleaned out?

 

A: We need to differentiate between the pay-in and payout problem. The pay-in and payout problem is happening for the cash segment, where there is absolutely no pain and no rupee problem. That is in spite of value erosion to the extent of 30-40%, happening in that segment as well.

 

Payments have been made by clients and if they have not been made, the losses are not as much, because volume happens to be more in the F&O segment. The leveraged positions or buyout positions, without having given a check by the clients, is very less and they get squared off the next day.

 

But the real problem is lying in the F&O segment, where the positions have been very huge. For example- people have lost over Rs 10 lakh in one contract of RNRL and it is the same case with Essar Oil .

 

So, as a risk control measure by broking houses, they have liquidated the trades of their client. The margins exhausted and now clients are screaming that they have liquidated the trades without consulting them, which is within the framework or the regulation of the NSE exchange.

 

But litigation ultimately remains between the brokers and clients, with regard to the margin or in regard to the losses having incurred on the trades, which have been liquidated by the broker. So, those amounts remain outstanding, which is quite substantial.

 

So, this pain probably may remain for sometime.  Otherwise, I do not think that the position which is still outstanding is really bothering, because that has already got changed. So, the situation has changed. But only the old problem of money default by the clients to the brokerages is creating a problem.  

  

Q: What is the situation on the primary market side? What have you been hearing about the grey market, after a sell-off of this magnitude?

 

A: The premium has got reduced for both the stocks-Reliance Power and Future Capital. They say that nominal premium is getting quoted of two-three companies. But they are nominal mode initiated by the management. At the moment, the three companies in which the quotes were available are IRB Infrastructure Developers, Emaar MGF Land and OnMobile Global.

 

In that also, the operators or the players only give nominal quotes in which there are sellers at every price and no buyers. So, all the quotes are available at nominal rates, in which no trade takes place.

 

Q: What about Reliance Power and Future Capital ?

 

A: Reliance Power is about Rs 150-155 and people are saying only the rate is being held on. One needs to look to the share when it get listed and same thing is holding for Future Capital. The nominal premium is available at around Rs 400-420 or Rs 425, which is again nominal, where people are willing to sell at those rates.   

 

Q: How are people approaching stocks like RNRL , that has had a big whack but seems to have a bit of buying?

 

A: People are confused in some of the counters, but especially in RNRL and RPL . The bounceback we are seeing probably has to do with the liquidation of painful positions, which have already taken place. Sooner or later, you will see bounceback in RNRL. The gas dispute settlement hearing is there on February 5 in the Mumbai High Court.

 

With the start of a refinery in RPL, profits are likely to get reported by RPL in their first year of full commercial production. Probably, those reports are suggesting a price of more than Rs 250-300, if one has a time horizon of 18 months.

 

Disclosure:

 

It is safe to assume that I may have an interest in the stocks discussed.