Tulsian picks Manappuram Fin from NBFC rally

Below is an edited transcript of the analysis. Also watch the accompanying videos. 

Q: Of the stocks which have been rallying in the NBFC sector, what is your pick?

A: The pause at the Rs 100-level forecasted for SKS Microfinance has been reached. So I won't be surprised to see the stock move to about Rs 105-108. Despite the euphoria, profit-booking will swiftly return for short-term investors as it provides a huge profit of maybe about 30% in one week. So I won’t be venturing into SKS Microfinance at these levels in view of the target of Rs 100 in the near-term.

After Baring India acquiring a stake in Manappuram Finance, much of the company's floating stock has been absorbed. Continuous buying at the lower levels has been initiated into the stock. However, the stock has not moved beyond Rs 34-35 even in the last run-up. And whatever buying was initiated has been absorbed by institutional investors.

About 10% of the floating shares were absorbed in the last run-up and a second rally has started to happen in Manappuram Finance. So I will maintain a positive view on the stock on the book-value close to price-to-book is 1 based on FY13 and PE multiple of about 4-4.5 based on FY13 earnings.

So I will be looking for Manappuram Finance with a target anywhere between Rs 38-40 over a horizon of the next 30-45 days.

Q: TVS Motor made a big move today after being dormant for at almost two months now. How would you approach the stock?

A: I have never maintained a positive stance on TVS Motor because it has been a weak stock in the two-wheeler segment just as  Ashok Leyland stands weak in the commercial vehicle segment.

But I am not enthused with the news of TVS Motor inking a technology pact with BMW as the company has announced that it has not entered into a definite agreement.

So even if I consider the discussions between both parties, the stock has to pause at some level, maybe Rs 40-42. But on technical parameters, the stock may not see a further rally from hereon.