SENSEX NIFTY
May 22, 2012, 08.12 AM IST | Source: CNBC-TV18

Weak rupee to affect auto; IT, textile to gain: SP Tulsian

After the pull-back mode on Friday, the BSE Sensex and NSE Nifty closed flat on Monday after shedding its gains in late trade. While the markets retrieved quite a bit, it moved up by 0.5%, two-thirds of a percentage point. However, the slide for the rupee continued and has reached an all-time low of 54.97 a dollar.

After the pull-back mode on Friday, the BSE Sensex and NSE Nifty closed flat on Monday after shedding its gains in late trade. While the markets retrieved quite a bit, it moved up by 0.5%, two-thirds of a percentage point. However, the slide for the rupee continued and has reached an all-time low of 54.97 a dollar.

In an interview with CNBC-TV18, SP Tulsian of sptulsian.com gives his views on the market and the effect of a depreciating rupee on various sectors. While he is not very bullish on Tata Power , Tulsian sets a target of Rs 72-75 for TV-Today .

Meanwhile, he also feels that though, depreciation of the rupee will have a positive impact on the IT sector, it will negatively affect the auto and auto ancillary sector. 

Below is the edited transcript of the interview on CNBC-TV18. Also watch the accompanying video.

Q: Tata Power is the biggest gainer today ahead of its numbers tomorrow. What are you expecting in general from the space and in particular from Tata Power this time around?

A: Generally, I am not bullish on Tata Power because of its Mundra ultra mega power projects. If you recall, we had losses in Q3 as well. Generally, the trend of the stock is that the moment it falls below 100, we see renewed buying coming back into the stock. Even last time, when we have seen the working to be quite dull because of the provisions for the impairment of the assets and all sort of things, the stock just corrected for a day or two.

The moment it fell into two digit again, we have seen renewed buying coming back. This is so because there are no other concerns on the other power projects, to the extent of about 3500 megawatt which they are operating, except for the Mundra.

I think the concern on Mundra ultra mega power projects will continue to look at Adani Power. I think further downside may not be seen. But, I will remain cautious. I won’t be adventurous to make any buying ahead of the results.

Q: In the morning you were talking about TV Today- it is already up 20% at Rs 65 what is your target in this run?

A: In the morning I expressed that probably, I may see some dissatisfaction happening on part of Reliance Capital. If you have seen the price movement of the stock, I am not saying that it is going to be hostile or maybe the Fame, Inox saga will be repeated here, but if you see the price behaviour of the stock for the first couple of hours, it was ruling 11-12% up at one point.

Thereafter, it fell to the level of about 10% rise. But, we have seen huge volume in the stock. In fact 30 lakh shares have already been traded on BSE and NSE. We need to see the total delivery percentage at the end of the day, once the market closes. If that kind of movement happens, then probably the share price can move to about Rs 80.

But presuming that Reliance Capital will have a gracious exit from the stock and that a stake of 13.5% is going to be acquired by Kumar Mangalam, who will then effectively hold 15.5%, then I will take a call of about Rs 72 to Rs 75 on the stock. I don’t think that it has the leg to move beyond a level of Rs 72 to Rs 75.

Q: Wanted your views with regards to earnings and companies which would see a direct correlation with the depreciation in the rupee?

A: Obviously the IT stocks will stand to gain. Maybe, some of the textile stocks that has exposure or those who have exports to a great extent will stand to gain. By and large, the companies could be the auto and auto ancillary because lot of ferrous, non ferrous metals are used by them.

Though, it is produced by the local producers, the prices are based on the import parity price. If you talk of the flat products or aluminium, copper, zinc or others, values are based on import parity prices. So, there is a mixed impact, positive as well as negative.

Q: I didn’t see anything positive in the Adani Enterprise numbers but the stock has moved up some 3-4%. How did you read into it this time?

A: That is right. If you see the market cap of Adani Enterprise now, it is between Rs 27,000 crore to Rs 28,000 crore. If you take the investments held by Adani Enterprise in Adani Port and in Adani Power, both are to the extent of about 75% stake valued at Rs 28,000-Rs 29,000 crore. And they have their own business of trading and other things.

The stock has already corrected so it could be more on the short covering side and I don’t think there is any justification purely on fundamentals. As I said, the market cap of Rs 27,000 crore, with this investment held in these two companies, have already corrected.

You don’t have much fear on Adani Port because the working has been good. You have fear on Adani Power but, that has also corrected substantially. Maybe, that could only be the fundamental reason for avoiding any further weakness. But, I agree that the results have been very good.

Apart from that, their trading income in the agro sector has not really been good. This could be the only reason that there is no further incentive on a fundamental basis to go short on Adani Enterprise.

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