RIL's poor Q3 results to negate buyback positives: Tulsian

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RIL's poor Q3 results to negate buyback positives: Tulsian

SP Tulsian of sptulsian.com believes the positives of Reliance's buyback plan will be negated by the company's Q3 results which will be released on the same day.

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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 Reliance BSE | NSE 29/05/12 Are Mutual Funds betting on Reliance? Other Stocks in this news Adani Enterprises |

SP Tulsian of sptulsian.com believes the positives of Reliance's buyback plan will be negated by the company's Q3 results which will be released on the same day. "I am expecting dull Q3 numbers," he said, adding that brokerages are expecting profit to be as low as Rs 4600-5000 crore.

It is due to the same reason that Tulsian says that stock price will not move above Rs 770-800 in the upcoming days. "However, this bubac will help set a support for the stock around Rs 725" he said.

Tulsian expects Reliance to announce buyback in the range of Rs 850-900, which amounts to Rs 12,000-15,000 crore for the company.

Below is an edited transcript of his interview with Udayan Mukherjee and Sonia Shenoy. Also watch the accompanying video.

Q: What kind of a range do you see on Reliance after it has moved 10% in two days?

A: I am not convinced that the stock will move beyond Rs 770 largely because we are expecting the dull Q3 numbers. If you see the estimates given by various brokerages, they are giving a very broad range of Rs 4600-4800 crore to maybe Rs 5000 crore plus. So definitely that is going to negate the gains.

But inspite of that, we are seeing the stock ruling quite high. This might be because of long positions getting created in anticipation of the stock moving to about Rs 800, but I have my doubts. In fact, the share is now ruling in the danger zone. So I would like to maintain my view that the share will not move beyond Rs 770.

Coming on the lower side, this buyback should help stock to hold a level of Rs 725. It all depends that how much allocation is made by the company and at what price, which I am expecting around Rs 850-Rs 900 with an amount indication of about Rs 12,000-Rs 15,000 crore for the company. So in that background, if it comes on these two parameters, the share should hold a level of Rs 725 to Rs 740. But it's not likely to move beyond Rs 800 because we are seeing the buyback announcements and Q3 results coming both together on the same day, in the same board meeting, so obviously this will neutralize the positives of buyback partly by the negatives of Q3 results.

Q: Is there any reason why Voltas has corrected so much today?

A: It's a surprise to me. Yesterday it moved up by about 8-9% and even today it was in the positive zone by about couple of percentage. I think this was on concerns of the Q3 results.

Sometimes you are unable to gather to information of one contract for which the management was compelled to book losses or something like that which the insiders get to know first. Then they start taking a call or start punting in the stock, so that could only be the reason. I am not able to connect any other reason for such a downfall in the share today.

Q: Adani Enterprises has seen no end to the upmove off late. What is your view on that stock?

A: Yes, it has been moving with a vengeance. If you see their low was about Rs 260 last week. In fact, you can place this stock with the likes of Tata Steel and many other stocks which have moved in the similar line. The trigger maybe informed buying coupled with short covering and could also do with the increase in Adani Power in which they have huge stake.

But if you see the corrections taken place in this stock, it used to rule at about Rs 600 around three-five months back and it has now corrected to below Rs 300. So maybe the upside is still seen to the level of about Rs 425-430 where it should take a pause. The kind of momentum which we are seeing in the stock has largely to do with the renewed buying interest, so it is not purely the short covering. The renewed buying interest can take the momentum further on from here by about 6-8%.