SP Tulsian evaluates: Reliance, Sesa Goa, ONGC, Lanco Infra

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SP Tulsian evaluates: Reliance, Sesa Goa, ONGC, Lanco Infra

In an interview to CNBC-TV18, SP Tulsian, sptulsian.com, gave reading and outlook for stocks across various sectors like Reliance, subsidiaries of State Bank of India, Sesa Goa, Lanco Infra and ONGC.

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Excerpts from Closing Bell on CNBC-TV18 Watch the full show » 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 Reliance BSE | NSE 29/05/12 Are Mutual Funds betting on Reliance? Other Stocks in this news State Bank of India | State Bank of Bikaner and Jaipur | State Bank of Mysore | State Bank of Travancore | Cairn India | Tata Steel | Crompton Greaves | Sesa Goa | Lanco Infratech | Oil and Natural Gas Corporation | ICICI Bank | Axis Bank | Yes Bank | IndusInd Bank | IVRCL |

In an interview to CNBC-TV18, SP Tulsian, sptulsian.com, gave reading and outlook for stocks across various sectors like Reliance , subsidiaries of State Bank of India , Sesa Goa , Lanco Infra and ONGC .

Below is the edited transcript of his interview with Udayan Mukherjee and Sonia Shenoy of CNBC-TV18. Also watch the accompanying videos.

On Reliance

When the stock fell below Rs 750 I maintained my view that I don't see any fundamental reason for the stock to fall below Rs 750. It touched a low of Rs 725-720. In that scenario, even hardcore investors are unable to make entry into the stock at those levels. They think that it could breach Rs 700 levels also because no levels are sacrosanct.

No opinions can stand in technical weakness because we did not have any kind of fundamental weakness in our market beyond a point. This would have got priced in at 4,700 or may be at 4,800 levels. Taking a converse view, I don't see any reason for the stock to move beyond Rs 845-850. We are exactly in the center. Should this be taken as an investment call or a trading call this has to be decided by each trader or investor.

Whenever there is rebound happening due to bullish factor coming in across the board, we will start seeing research reports which will say that the stock has no reason to fall below certain levels. But one has to take a contrarian call. The banking stocks like ICICI Bank , Axis Bank , Yes Bank , IndusInd Bank are available at rock bottom prices. Similar is the case with capital goods. The same story holds for Reliance Industries.

I was a bit apprehensive yesterday and was expecting the stock to take a halt at around Rs 800 level. This was because of the report which said that reserves of all the shale gas assets in the US has been reduced by 80% and two of the blocks of Reliance Industries fall in that category.

But I don't think, it has really been factored in by the market or has been largely discussed as of now. That may come into play n next couple of days. We may see the price peaking out at about Rs 840-845 levels. But I wont be taking a fundamental positive call beyond Rs 850 till Q2 results of the company is seen in next couple of months.

Also Read: Market may bounce back to 5500-5750 says Sushil Kedia

On SBI subsidiaries

We see this kind of upmove where the stock goes up by 30-40% suddenly the rally gets fizzled out. This mainly happens on the hopes that all these banks ( State Bank of Bikaner and Jaipur ,  State Bank of Mysore and State Bank of Travancore ) are likely to merge. State Bank of India holds about 75% stake in all these three banks which are listed.

The conversion or the swap ratio will be quite beneficial in the interest of the smaller or the subsidiaries if this merger happens. Sometimes inspite of having clearances from the government there are other concerns.  For instance, during the merger of State Bank of Indore there was lot of union problem. The management has indicated that they may not go ahead for merger of any of the subsidiaries in FY12.

If there is no positive development happening on a sustainable basis the rally in these shares gets fizzled out and it corrects. Investors have lost money whenever they have entered post a rise of 25-30% in all the subsidiary stocks.

On Sesa Goa

I don't think the 10% move in this stock is sustainable because on fundamental there are two negatives. One is with respect to the mining ban and secondly, the company is turning from cash positive to debt ridden for acquiring stake in Cairn India . Both are negative for the stock.

Their Q1 and Q2 results are always subdued because of  monsoon and I don't think there will be any hopes for Q3 and Q4. Overall, FY12 will be lower than FY11. Market never accepts falling trend of profitability posted by any company.

We are seeing technical strength but fundamental weakness remains. It is very difficult to take a call whether it will correct from Rs 240, Rs 245 or Rs 250. The price hammering seen in these stocks has been much more than the fundamentals.

The case in points could be Tata Steel , Crompton Greave , Sesa Goa and Cairn India. Technical strength is seen but on a fundamental basis I won't be taking a positive call on a very longer horizon of three-six months.

On ONGC

I am not expecting FPO to come at a price of more than Rs 250. Going by the usual practice of giving 5% discount to retail investor the effective cost to them would come at Rs 238-240. In that situation, ONGC may fall to about Rs 252-254.

This is because Rs 250 will act as a strong support but it won't breach below that. It cannot go beyond Rs 265. There have been news saying, FPO is likely, the company is ready with the RHP, they can file it in 24 hours and road shows may happen in next one week. So, I take a range of Rs 250-265 with a negative bias for next 15 days.