Selectively enter power trade, says SP Tulsian

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Selectively enter power trade, says SP Tulsian

SP Tulsian of sptulsian.com spoke to CNBC-TV18 about market trades in the power sector and oil and gas space. Watch out for his picks!

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ALSO READ See what other experts are saying about markets See what FIIs are saying about the markets See what Udayan Mukherjee is saying about the markets Tata Power BSE | NSE 24/05/12 Are Mutual Funds betting on Tata Power? Other Stocks in this news Adani Power | Torrent Power | Reliance Power | Indiabulls Power | Indraprastha Gas | Petronet LNG Ltd | Reliance Industries | Gujarat Gas Company | United Breweries | United Spirits | Wockhardt | Sesa Goa | Sterlite Industries (India) | JSW Steel | Jindal Steel & Power | Hindalco Industries |

SP Tulsian of sptulsian.com spoke to CNBC-TV18 about the power sector stocks that are seen rebounding now. He says that one can selectively buy Tata Power or Adani Power , however, the rest including Indiabulls and R Power is better avoided now.

In the oil & gas space, Tulsian says that though the effect of marketing margin regulation cannot be nullified, IGL  (Indraprastha Gas Limited) is set to recoup losses within this week.

Below is the edited transcript of his interview. Also watch the accompanying video

Q: What would your take be on power stocks? One analyst view was that the very fact that it is in focus would mean that the problems cannot get any worse. Is that a good interpretation? Is there a buy in that space?

A: It maybe fair to say that things may not get worse from here, but it will be optimistic to think that anything can really happen in the next six months or so. In the case of change in power purchasing agreement (PPA) or maybe the permissibility of coal diverted for other power projects for which it has been allocated, all these things require legal views. They had been holding reservations that these things cannot be done. 

Adani Power has been crying for continuation of PPA since the cost at which they have entered the PPA for 25 years is definitely not feasible and viable. All of those projects have gone operational; even with Tata Power - the Mundra Ultra Mega Power Project.

So the bleeding or the losses will continue to get incurred by these companies. There are going to be hopes, but I don't think that those things will come in the near-term or in the next three-six months. In that scenario, it will not be viable or sensible to buy here when other sectors are available for buying into.

One maybe very selective; take the case of Adani Enterprise and Adani Power, because Adani Power is also in a way a proxy play for power, and Adani Enterprise is getting its value from Mundra Port and Adani Power Holding. So in both these stocks, you have a market making element or maybe the informed circles keep buying those stocks. Therefore, one can be selective there.

Tata Power is seeing a lot of buying interest, more especially of the institutional kind. Torrent Power could fall in that category, but I don't think that I will really be comfortable in taking the call on Indiabulls Power or even R Power for that matter.

Q: When we spoke with the management of Petronet LNG earlier in the morning he said that don't expect a significant impact on the company's margins even if those marketing margins are capped, but why do you think IGL is correcting so much even today?

A: I think both are at its extreme ends because if you take this marketing margin or rationalization or any directive coming on that, probably Petronet is at one end which will get least affected, while Indraprastha Gas will get maximum affected. In between, you can place Gas Authority, Reliance Industries and maybe the Gujarat Gas kind of stocks.

Again, Gujarat Gas is will less affected and is moving with the news of stake sale by BG.

I don't think that one can really generalize the negative impact of the marketing margin regulations or the capping expected which is not likely to happen in next 12 months or so, but on technical factors, Indraprastha Gas is correcting. It seems like probably it is bottoming or maybe again renewed buying interest from hereon will be seen in next couple of days. It is capable of giving a bounce back from thereon of again 8-10%. So major losses can get recouped in this week, but only in case of IGL.

Q: We have had a steady run in the markets from end December onwards. Would you advise picking up anything or have you advised picking up anything in this run up?

A: One has to take a selective call. To give an example, I will probably go positive on United Breweries and United Spirits , maybe Wockhardt , Sesa Goa and Sterlite Industries too. I think I am holding my positive view on non-ferrous metal stocks as well as maybe the ferrous, ones of the likes of JSW Steel , Jindal Steel & Power and Hindalco . One can take a long call on all these stocks.