Tulsian analyses 9 stocks to add/remove from your portfolio

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 Gati BSE | NSE 25/05/12 Are Mutual Funds betting on Gati? Other Stocks in this news Dishman Pharmaceuticals & Chemicals | Apollo Tyres | Dhanlaxmi Bank | Manappuram Finance | Muthoot Finance | Reliance Capital | Reliance Communications | Reliance Infrastructure | Steel Authority of India | Hindustan Zinc | Hindalco Industries | Sterlite Industries (India) | Jindal Steel & Power | JSW Steel | IVRCL |

In an interview to CNBC-TV18, SP Tulsian of sptulsian.com analyses select stocks such as Gati , Dishman Pharma , Apollo Tyres , Dhanlaxmi Bank , infrastructure stocks, gold companies Manappuram General Finance and Muthoot and ADAG stocks.

Below is an edited transcript. Watch the accompanying video for more.

Q: One stock that is baffling everyone is the upmove that we have seen in Gati. It's rallied close to about 70% this entire year. Is there any kind of news that you are picking up on Gati?

A: I don't think that there is any reason to be surprised or be baffled by this kind of upmove. If you see in the month of December, it was a foregone conclusion that probably the company will default on its FCCB and because of that we have seen the share correcting to as low as close to about Rs 25, but thereafter things have improved. They have been able to raise money to repay that old liability.

If you see the business model of Gati, I don't think that there are any concerns, the kind they have in their sea-shipping and their land business. Overall their logistic business has been doing very well. In fact this problem of the lower profitability has been more of a temporary phenomenon. If you see the management structuring or the corporate governance issue, that is extremely of a very good order and is very comforting.

So, this is because of the hammering which we have seen in other stocks like Suzlon, IVRCL or maybe GMR Infra where we have seen a bounce back of 60-100%, the similar pattern is seen here also. I don't think anyone has any doubts on their business model. It was more of the FCCB liability fear and the present concerns on its profitability.

Q: The midcap companies that came out with good numbers were Dishman Pharma and Apollo Tyres. Which one would you like hereon? How do you gauge the numbers?

A: Dishman Pharma definitely has posted very good results and the same is the case with Apollo Tyres. But it is difficult to take a comforting call on both. Dishman has never been a reliable stock because if you heard the management, even they have not been able to give clarity whether the other income or the extra improvement in the margin has come because of the CRAMS etc.

Similarly, with Apollo Tyres, because rubber pricing is such a big spoilsport that ultimately, that is giving direction to the share price. I have not been holding my positive view on tyre companies. Maybe in view of so many other ideas available in the frontline space, from a trading point of view, probably it will be better to take a call there instead of taking a call on these two stocks.

Q: What about Dhanlaxmi Bank? Despite clarification coming in from the CFO saying that the promoters are not looking for a stake sale, Dhanlaxmi Bank continues to run-up. What's the story over there?

A: I don't think that the market will really be giving much credence to the statement given by the CFO because obviously, there is no smoke without fire. This is a kind of pattern we have seen panning out in Thomas Cook also where the market had not given much credence in spite of the managing director of the Indian arm coming and saying that he has no idea about the stake sale etc. So, whenever you see that news getting matured you see a concentrated move coming in.

All the events which have happened now with Amitabh Chaturvedi resigning from the bank, obviously there has to be a big change happening in the bank, either in the form of stake sale by the promoters or the new dynamic team coming in. So that is making it very positive.

If you see, the stock has been languishing at about Rs 50-55 in spite of the newsflow that the second round of equity dilution is pending which is likely to happen at Rs 120-130. All this makes the stock quite positive and that's the reason we are seeing a sharp upmove in the stock today.

Q: From the infrastructure space, is there anything that catches your eye, anything that could still see more upside from here because the valuations are still quite depressed on many of these stocks?

A: One has to really see the kind of run-up which we have seen in these last 40-45 days. In that scenario, if you really take a call probably you may not get convinced with the stocks which are still showing some of the strength. But taking a broad perspective, where I will include maybe metal, infrastructure or capital goods stocks, there are many ideas which still look good.

One could be Suzlon and the second could be SAIL . In fact if you see, ferrous metal stocks have not really participated in the rally whereas the non-ferrous ones have already run up quite a lot - Hindustan Zinc and Hindalco . Sterlite has been the late mover which now seems to be participating. So maybe one can take a call on the ferrous metal stocks. I would pick and choose stocks like JSW Steel , Jindal Steel and Power or even SAIL.

Tomorrow we are again having the Supreme Court hearing on the Karnataka mining ban. That is going to have a big effect on the mining stocks. So if you take an overall call, yes, there are many ideas looking quite good.  There is renewed participation which we have seen coming back in IVRCL on which I have been holding a strong positive view since it was ruling at about Rs 30. Be selective in taking a call and let's not get upset with the fall of a couple of days by about 4-5%. Your trading strategy must be played with conviction.

Q: On the gold financing companies - Manappuram General Finance and Muthoot, do you expect the RBI to impose some sort of a regulatory curbing because it is worried about the pace of growth in gold loans?

A; As a regulator, it is obligatory for the RBI to look into these kinds of things because the way they have been catering to the masses is obviously the way we have seen the hue and cry in the case of microfinance which could have happened in this also. So, it is not only in respect to the increasing risk weightages but in my view there has to be so many regulatory moves which are likely to come maybe in terms of interest regulations, maybe in terms of increasing the risk weightages etc because of the kind of mushrooming growth we have seen.

In fact all the NBFCs and the pure stock broking companies have been seen moving into this business. So, it will be alarming and it will be imperative on the part of the RBI to look into all these things and they will definitely have a tough time. In fact Muthoot and Manappuram have been raising or leveraging their balance sheets by coming out with the bonds issue because they were prohibited by the finances from the bank. So, this is all very much required that the RBI becomes proactive and initiates a move before something wrong happens in this sector.

Q: Tomorrow we have a couple of these ADAG stocks coming out with their results like Reliance Capital and Reliance Communication . After the good run that the stocks have seen, what are you expecting to hear on the earnings front? How would you approach these names?

A: I don't think the earnings will really be a kicker for all of them. I am not too worried for Reliance Infra because it will be a flat kind of performance expected from the company, but one has to keep a close watch on Reliance Capital and Reliance Communication. I don't think Reliance Communication will really cheer the market, but Reliance Capital, in their finance and investment portfolio where they have a strong presence - the capital employed is to the extent of Rs 6,000-6,500 crore.

If they don't show any improvement in the Q3 because for H1 their performance has been very bad, it has been a flat kind of EBIT performance. Probably the chances are that if you have global positive cues probably the rally can continue, but I am keeping my cautious view that we may see profit booking coming after the results have been announced by all three companies.