RIL, Sterlite, Sesa Goa: SP Tulsian analyses all

Sterlite , Tulsian says, does not have its own leg to discover the price. “All the call should purely be taken on Sesa Goa . Sterlite will only follow the trend,” he adds.

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

Q: What is going on in the infrastructure space? Is it unwinding that is leading to this 12% kind of cuts in stocks like Lanco?

A: We have seen huge delivered based buying in Adani Power , Lanco Infra , IVRCL , NCC , Suzlon , GMR and GVK . If you see the last ten days volume chart, on the delivery basis, huge buying has really happened. I don’t think that this is long liquidation. This is in fact the profit booking. One can add the stocks like IFCI , Sintex and Arvind also in this list.

We are seeing delivery based selling. Whenever these things happen, I don’t think that technical factors can really support the stock at any level. All the technical supports get broken, whenever there is delivery based selling. I think this is effect of that. That is getting coupled with the liquidation for long positions also.

We have seen people becoming very positive or exuberant at the close of the expiry. We have seen people rolling over those long positions in the March series. I think the trigger is delivery based selling.

Q: You were speaking about Sesa Goa in the morning, but were you expecting Sterlite to slip off as well?

A: Sterlite does not have its own leg to discover the price. Now, wherever Sesa Goa will rule, Sterlite will rule 56% of that price. On simple logic that 5: 3 is the swap ratio. That means 60% of that effective valuation comes for Sterlite Industries.

The company, which is getting, merged always rules at a discount of maybe about 6% to 7%. That is generally the arbitrage. The whole process will take five-six months. So, taking that interest component, it rules at about 6% discount. So, if you take 6% of 60%, it works out to maybe about 55-56%.

I don’t think there is rocket science involved in discovering the price of Sterlite Industries. Just simply take the 55-56% of the price of Sesa Goa. So, all the call should purely be taken on Sesa Goa. Sterlite will only follow the trend.

Q: Where do you see Reliance stabilising because it had a great run beyond many people’s expectations to Rs 820 plus, but is now back to Rs 780?

A: Even I was not convinced that it can really cross Rs 800 plus. The positive bias of the overall market for the last couple of months probably has taken the share price to move to about Rs 860. The stock can fall to about Rs 760.

I don’t see any reason for the stock to move beyond Rs 800. It will be really interesting to see that how many shares are bought back by the company when the share falls to Rs 760 or maybe Rs 750. That will be the key determined factor. If that buying does not come from the company under the buyback programme, probably the negative perception can build up. But I don’t think the stock can really fall below Rs 760 in this carnage.