Don't buy midcap PSU banks at current levels: SP Tulsian

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 Vijaya Bank BSE | NSE 24/01/12 Are Mutual Funds betting on Vijaya Bank? Other Stocks in this news Union Bank of India | Bank Of Baroda | UCO Bank | Allahabad Bank | Andhra Bank | Indian Overseas Bank | Dena Bank | United Spirits | IVRCL | Stride Arcolab |

SP Tulsian, sptulsian.com is negative on midcap PSU banking stocks for the February series. "In spite of good results likely to be posted by all the midcap PSU banking, I won't be entering into at these levels. I will probably wait for their prices to correct," he adds.

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Below is the edited transcript of his interview with CNBC-TV18's Udayan Mukherjee and Sonia Shenoy. Also watch the accompanying video.

Q: Did you take a look at the Strides Arcolabs and the move over there?

A: Definitely, it is a positive deal for the company. The debt has piled up a lot in the company's books. As indicated by the management they are planning to reduce the debt by about USD 250 billion. That will definitely be bringing down the debt-equity ratio. So, overall, it is positive for the company.

Q: What did you make of that news that CCI's given its approval for IVRCL to merge with IVRCL Assets?

A: It is a very positive news. I have been playing on this news. That was the reason I was holding my positive view. Once this merger will happen, this will be seen quite positive for the stock because this is not leading to any equity increase; 75% of the stake held by IVRCL in IVRCL Assets is getting extinguished.

Secondly, the monetisation of the assets will happen quite fast because the merged entity will now be hiving off the realty stocks held by the IVRCL Assets and other PPP projects held by the company. So, the process of assets monetisation will accelerate. That will reduce the debt of the company in a very faster basis. If they are able to do that by about Rs 1,000-1,500 crore, I don't think that you will have any concerns on the IVRCL because the core business model of the company is looking quite intact.

Losses, which we have been seeing on the consolidated basis, have largely been coming because of IVRCL Assets, the company which is getting merged. If you see the stand-alone performances have been quite good. Order book has been quite good. So, I am quite positive on this development.

Q: United Spirits is falling in a rising market. What did you make of the numbers?

A: Definitely, the Q3 result has been the culprit. I don't think that correction can really last for a very long time. The stock has risen from about Rs 450-675 in the middle of January. That has led to huge trading positions getting created. So, probably it is a liquidation of the trading positions. That should settle or stop maybe at a level of Rs 550.

Q: Tomorrow, we have a slew of PSU banks announcing their numbers like Vijaya Bank , Union Bank , Bank of Baroda etc. Do you like anything in the broader market banking space?

A: I have been keeping my positive view for last ten days on the midcap PSU banking stocks. I am keeping positive view on midcap PSU banking stocks like Vijaya, UCO Bank , Allahabad Bank , Andhra Bank , Indian Overseas Bank , and Dena Bank . I am still maintaining my positive view there. The only problem is the kind of run-up we have seen. We started January series below 8,000 on Bank Nifty. It has already moved up close to about 23-24%.

I am maintaining my negative view for the February series. So, probably the rally will be seen tomorrow and on the first day of the new series- Friday. Thereafter, I will be cautious. In spite of good results likely to be posted by all the midcap PSU banking, I won't be entering into at these levels. I will probably wait for their prices to correct.

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