Surging market: SP Tulsian's trading strategies

In an interview with CNBC-TV18, SP Tulsian, sptulsian.com shares his trading strategies and how to make best use of the upswing.

With a cautious outlook, Tulsian warns that Punj Lloyd can see a further correction and continues his bearish call on sugar stocks. His top picks in the realty sector are HDIL and DB Realty .

Here is a verbatim transcript of the exclusive interview with SP Tulsian on CNBC-TV18. Also watch the accompanying video.

Q: Relatively small acquisition from Reliance this morning, USD 350 million or so, but a string of such moves in Shale gas area have been struck over the last few months, what do you make of this? When do you think this will start paying off?

A: It seems that the company, after having made a couple of acquisitions, is taking a bit of cautious call. They don’t want to go too aggressive on the pricing front because we all know they have the record of acquiring the assets at relatively lower than the prevailing market valuations.

We gather from the sources that they have been quite aggressive in hunting for these kind of assets in US and maybe some more acquisitions could be on the card in the next 12 months or so. But I don’t think, right now, they are in a big hurry to acquire these assets.

Q: Punishment done for Punj Lloyd or do you think there may be more?

A: I think may be it can fall to Rs 110 because there is uncertainty. With every passing quarter, you develop some hopes that probably this time management will come and say that they have turned around. If you see this time, there were expectations that they will post a PAT (profit after tax) of close to about Rs 60 crore. But the kind of losses they have posted, to the extent of Rs 30 crore on consolidated basis and maybe Rs 6 crore on standalone basis, shows that still there is lot of pain.

Merely increasing order book won’t help because it is more of the order execution and the problems on the overseas contracts. Unless and until you have clarity coming from that, the more you see these kind of losses coming in, you will be requiring a larger time, which in my view has to be atleast two quarter. If the company can post a reasonable result for the next two quarters then only some stability or confidence can come back into the stock. But for the time being, in the near-term, the share can correct to Rs 110.

Q: Any thoughts on the two small IPOs (initial public offering), which have been all over the place, Midfield Industries and Aster ?

A: Midfield Industries looks to be the action replay of Aster Silicates. It is better we just analyse Aster Silicates. The traders have made huge losses in this stock in just one week’s time, share having shown Rs 250 and since then it has been corrected with three lower circuits and till yesterday it was frozen in the lower circuit of 10%. Honestly, I don’t understand why these companies are going scot-free.

When Aster Silicates went public, at that time, all the information was gathered on how this whole issue is being structured by cornering the operator and what kind of pricing will be taken by him. So, it’s very unfortunate. I wish that Midfield should not become an action replay of Aster Silicate, but it looks like because operator will not be pumping in money, he will definitely be looking for exit route. And for him that will only be from the retail investors who get lured by these trading bumps and they think they will be able to exit with a gain of Rs 20-30-40, but eventually they get trapped to make a loss of more than 50%. So maybe it will be an action replay of Aster Silicates.