Traders should avoid taking call on small-cap bets: Tulsian

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As market regulator SEBI earlier asked stock exchanges to impose penalty on brokers for allowing clients to trade in derivative market without sufficient margin money, SP Tulsian of sptulsian.com cautions that traders trying to identify the lower levels in stocks like KS Oil or Karuturi should avoid taking calls on these kinds of stocks.

"Operators are tired post the carnage of US and Europe, I don't think there is any strength left with them. Hence, financials will be compelling upon them to liquidate and release their payments," he says.

Tulsian also says the CCI penalty on DLF is justified and is leading to a spill over on real estate stocks. On the upcoming ONGC FPO, even with the subsidy sharing mechanism in place, Tulsian says that FPO can really happen beyond Rs 250.

Below is an edited transcript of SP Tulsian's comments to CNBC-TV18. Also watch the accompanying video.

On DLF

The Consumer Commission (CCI) remarked the DFL case as a brutal disregard of consumer rights and I think it is the apt remark for all such developers. Developers ask the purchaser's signatures on all conditions but they do not stand on any of their commitments. If there is a delay, or if they construct illegally nobody questions them. However, if a purchaser delays even by couple of days they charge 18% to 24% interest. Hence, if you have this kind of remark I think it is warranted.

The Rs 600 crore penalty looks bit higher but it is justified for the kind of pain faced by the flat purchasers. Such an order will get applied to all the developers whether they are listed on the stock exchange or they are not. This has been the trigger for the stock to correct and it is spilling over on all other real estate stocks.

On BF Utilities

Over the last couple of days, I am not taking fundamental calls on stocks. I have been trying to find who the operator is. Therefore, sometimes you really need to gather all this information to find out the movement or the outcome or maybe the price behavior likely to happen in all these stocks. You need to put them all in one category. If you see one stock correcting, for instance if KS Oil is correcting, Karuturi Global, Nagarjuna Construction and  Lanco Infra will also correct.

When you hear Vimal Rathod, he is an operator active in Karuturi Global, IVRCL Infra , Nagarjuna Construction, Lanco - which is a set of stocks are operated by him. BF Utilities, HDIL , Kingfisher , SKS Microfinance and Jet Airways fall in the second category. In third category you get to hear about Anant Raj Industries, Indiabulls Real Estate , CCL Products , Reliance Infra and Reliance MediaWorks which are controlled by one set of people.

On ONGC

With crude price close to about USD 105-108 per barrel, this is the time when the government can come out boldly with this subsidy sharing mechanism. Unless and until you have that subsidy mechanism in place, you cannot really get a better valuation for ONGC.

Maybe cooking fuel subsidy must be totally bourn by the exchequer and the auto fuel subsidy can get shared by the upstream companies and partly by the government. I don't think that it is possible in any case beyond Rs 250.

I suppose QIP holds no meaning because if the overseas investors or the FII would not have responded then obviously LIC and the insurance companies would have come to the rescue. Hence, even with the subsidy sharing mechanism in place I don't think that FPO can really happen beyond Rs 250 for ONGC.

On NBFCs

Two to three NBFC's that are in the listed space in the broking community are badly stuck in various stocks. The losses running to about Rs 400-500 crore are causing worry. However, the problem is that these NBFC's have brought those stocks in their approved list and today the situation is that you can't even sell 5000 shares in it. Hence, even if they are stuck in those stocks withholding about maybe two to five lakh shares, they are unable to find any exits.

On operator stocks

I don't think operators have the strength to pump in more money because they have already exhausted their cash resources. We have seen operators getting tired and since the carnage of US and Europe I don't think there is any strength left with them, either of the funds or of the market operations.

In that event the financials will really be compelling upon them to liquidate and release their payments. So only thing it needs to be seen whether they expose themselves or they try to salvage, there are no chances of any upside. All the traders trying to identify the lower levels in case of the stocks like KS Oil or Karuturi should really avoid taking call on these kinds of stocks.