RIL turns damp squib; infra stocks show promise: Tulsian

Tulsian points out to the upsurge in the four ADAG stocks with Reliance Infrastructure performing better on promise of an upside of 4-5%.

The market analyst's picks for the day include four stocks from the infrastructure sector- Nagarjuna Construction Company , IVRCL , Lanco Infra and Suzlon .

Below is an edited transcript of the analysis on CNBC-TV18. Also watch the accompanying video

Q: What is your view on Reliance after the declaration of a target to produce 60 mmscmd of gas over the next three-to-four years?

A: The absence of conviction in declaring this target gives rise to a sense of disappointment. The tentative or casual manner in which the guidance was given does not provide any significant indication of a gradual increase or decrease in gas production.

I don't think the target will be achieved in  FY13 because the market is not enthused over projections or estimates spread over the long horizon of three-to-four years.

The market is apprehensive about the output in FY13, as nothing specific has been discussed or announced.

Q: In which direction do you see Reliance head because from the last AGM to the present one, the share has fallen from Rs 950 to Rs 730? Do you think the ongoing share buyback will support the stock at this level or do you think the stock will fall further?

A: The share buyback is the only good support or strength for the stock. I don't see it moving beyond Rs 745-750 because the way the company has bought back shares, to the extent of 22.5% as of now with an average price of Rs 715, I don't think that the company will be too aggressive to buy stock beyond Rs 745.

So, the level Rs 750 could really be a cap for the stock even if the market or economy remains positive for a very long time.

If the share falls below Rs 700, the company will hasten the process of the buyback. I don't think that the buyback will remain only confined to the extent of 3 crore shares but  whether it will exhaust the entire 12 crore shares or not, is difficult to say.

On a broad range, investors should expect a range of Rs 680-745 for the stock. If it falls to around Rs 690, short term traders can take a positional call or if it moves beyond Rs 740-745, investors can book profits.

The first quarter results will really be very interesting to watch because the company has said that it has started using five types of crude to ramp up margins. This will decide what differential the company will really enjoy. So, the share might go beyond Rs 745 on first quarter results. Till that time, the share will range at Rs 680-745.