Sugar stocks are sweet deal; avoid LICHF: Tulsian

There are indications from the sugar mills that the current or the future season will be very robust. the government may take some steps to ban exports and that will further fuel the global prices, which will be seen quite positive. So overall, the scenario looks very for the current season and maybe the sugar stocks can rise further from hereon by about 25-30% in next four-six months.

Below is the edited transcript of his interview to CNBC-TV18.

Q: What is your view on Reliance Communications after Flag Tele disappointment?

A: It is very unfortunate and if we don't see the deal happening then I think this is quite negative for the stock because the debt is continuously piling up and on the other hand they are unable to monetize any assets to add to it their working capital is not supporting.

The stock has corrected so much that one can't think that it can fall below these valuations, Rs 60 looks a very strong support for the stock. If there is no monetization of asset in the next two to three months, then one need to wait for the calls of the management what all indicates, so then negative or pessimism will start further building up on the stock.

Q: How did you react to Idea Cellular's numbers and how do you see the stock move today?

A: Sequentially, there is a slight disappointment. But I do not think that market will be taking that negative. This stock looks good at Rs 80.  Now, all eyes are on the EGoM where they will be initiating how beneficial it will be all for the telecom stocks. So I do not think that the results will be an event for the market to take negative call on this stock.

Q: What is your view on LIC Housing Finance because the stock was down 4% yesterday?

A: Considering yesterday's fall there are quite apprehensions that the result may not be on the expected lines and we may see disappointment. In fact, same performance has not been seen from HDFC , GIC Housing Finance and Gruh Finance . So there is no reason for the housing finance companies to disappoint. But yesterday's price behaviour has cautioned that there could be some negative surprise.

Q: What do you do with sugar and how do you explain the kind of optimism that slowly creeping back into this space?

A: In the last one month we saw rise in global prices; white sugar is at USD 650, raw sugar is at 23-24 cents per pound. For the first time we saw Southern mills realizing Rs 1.50 higher than UP based sugar mills. All these things indicates that there is rise in sugar exports by Southern sugar mills and this time production is not likely to be very high and it may not exceed 25 million tonne.

There are indications from the sugar mills that the current or the future season will be very robust.  On an average even if they have a realization of Rs 32 per kg for Maharashtra and Tamil Nadu based sugar mill, this is seen quite positive.

The government has started worrying because last week we saw sugar being sold at Rs 40 in Kerala and that was an eye-opener. So, the government may take some steps of export ban and that will further fuel the global prices, which will be seen quite positive. So overall very positive scenario for the current season and maybe the sugar stocks can rise further from hereon by about 25-30% in next four-six months.

Q: HUL is sitting at 30 times FY13, how you approach it now and despite the strong set of numbers do you think the upside will be capped or do you expect more to go?

A: I agree that there is a good 9% growth in volumes. People have been taking a defensive call on all these stocks. I do not think that it is wise to invest in these stocks at these levels, in fact all of them have become a trading stock. One can keep a range of about 6-8% for HUL. One can keep trading in the range of Rs 440-470. Traders can exit at Rs 465-470 and again re-entry at Rs 440, so seen very limited upside from hereon but an excellent trading ideas maybe like HUL, Dabur , ITC from hereon.