The weekly option expiry, which is on Thursday, is likely to be positive considering the intra-day volatility visible now, believes SP Tulsian of sptulsian.in. He recommends not shorting on the Bank Nifty
with a likely rate cut coming in the central bank’s December meeting.
Tulsian continues to be positive on non-banking finance companies (NBFCs) especially with rural focus. Below is the verbatim transcript of SP Tulsian’s interview to Anuj Singhal and Sonia Shenoy on CNBC-TV18.Anuj: The space that you were extremely bullish on, non-banking finance companies (NBFC), we have seen a huge rally. Do you see more legs to this rally, especially names like Bharat Financial which clarified to the exchanges that their business has not been hit too much and Bajaj Finance?A:
Firstly, if you see the rally which we have seen in the last three days of about 15-20 percent, that is not small. Let me put that fact in perspective, number one. Number two, market was grossly incorrect in assessing the situation that things will all be very bad and when the RBI has allowed the window of 60 days, that was also misconstrued and misinterpreted, number two. Number three, if you see the situation going forward, in fact I see huge potentials on NBFCs going forward and yesterday also, in the afternoon, I am sure, I have repeated that the rural NBFCs which have a very strong presence, where I gave the names of Bajaj Finance, Bharat Financial Inclusion, Ujjivan Financial Services
, Manappuram Finance
and all sort of things are having great future ahead, going forward because the kind of credit growth which we will be seeing in all those things because the positive effect will be seen on all the sectors, whether you talk of housing, construction finance, I am not talking of these rural finance companies, those who have an average ticket lending size of Rs 10,000 to Rs 40,000.
So yes, continue to have a positive bias and I will not be surprised to see. It is futile to take a daily call that okay the stocks have risen for a couple of days or two or three days. If he really wants to make money, you need to have a view of at least a couple of months, maybe ahead of Q3 numbers, one can look to book profits, maybe at the end of January or middle of January. But till then, I will keep my positive view on all these NBFCs.Sonia: Many stocks have been hitting 52-week highs and Mahanagar Gas (MGL) is one of them. I remember you being very bullish on this listing ever since it came through. The numbers were very good from the company as well. Would you still advise putting money in here?A:
When the stock got listed, we were getting a huge opportunity of the differential between Indraprastha Gas
(IGL) and MGL. Honestly, at that point of time, when the stock fell below Rs 550, I gave a buy call at around Rs 535-550 and it fell below that. And at that point of time, IGL was ruling at a level of about Rs 800 plus. And if you compare the fundamentals of both the companies, maybe MGL is slightly lower in size, but if you take the promoter holding, if you take the financial performance, operating margins, all over, MGL was having a one-up on IGL. So, now the differentials have come to the very close and looking to the 40 percent growth which the company has posted, they have come out with very good numbers. But the share has also risen to a level of maybe about Rs 800 or so and I do not think honestly, maybe the mild positive bias you may be seeing, but I will not hesitate in giving a profit booking call because I am not seeing much upside going from here on MGL as well as on IGL, both.Anuj: Good run in auto stocks today, both Maruti and Eicher Motors . Do you get a sense that these stocks have bottomed out?A:
Probably not because when I will be seeing the monthly sales number for November, that will be give a little jerk. I am not saying specifically for Maruti, but yes, the other stocks or maybe you can exclude Eicher also, but if you take a general call on any other stocks, the impact and the impact will fully get reflected into November so all these auto stocks can come on a clean slate for the December month and thereafter the things will start looking up. So, maybe in a couple of days, we will be seeing the monthly sales numbers which will spoil the party, so I am keeping a cautious view on auto stocks. And more specially on Maruti and Eicher because both have corrected to a great extent and both are seen the institutional favourites as well, the kind of buying which we see coming swiftly in both these stocks, probably they are moving up.Sonia: I wanted to ask you about the paint stocks. So, names like Asian Paints, Berger Paints have all started to see some amount of recovery. Would you advise investors to get into any of these names?A:
Post this eighth or ninth or tenth, when all these stocks have corrected, I have been taking a contrarian view and I, at that point of time, also gave a view or maybe a buy call on the NBFC, cement and even on paint stocks. But if you want to ask me now, I will rather go with the two paint stocks, one is Shalimar Paint
s and second is Berger Paints
. I am not saying that Asian Paints is not a good stock in that category because as such, you have just five choices available amongst the listed paint space, so I will not be going for the Kansai Nerolac
and maybe the fifth one. But yes, my preference still will be a buy on Shalimar Paints at maybe Rs 156-157 and on Berger Paints at Rs 240. I will not be plunging into Asian Paints now at the current level, but two stocks qualifies on my buying list.Anuj: I wanted to take that point with you as well. What is hampering Bank Nifty fundamentally. This is underperforming clearly. Stocks like ICICI , the big banking stocks clearly underperforming.A:
Again, if you take a call, I do not think that actually sometimes the market players start expecting that all the sectors should perform in the same direction at the same time. It does not happen like that. Take the case of Bank Nifty. The weekly option expiry is on Thursday. I will not be surprised to see that happening on a positive note because the kind of volatility which we see on intra-day basis definitely in the morning, everyone was positive and gung-ho. Yesterday, everyone was negative on the Bank Nifty
because of cash reserve ratio (CRR) hike. Now if you see the CRR hike background, that has come under the stressed circumstance because market stabilisation scheme (MSS) cannot be issued by the RBI to absorb the liquidity.
So, if you take the situation, tomorrow going forward or maybe day after, in one day, you can see Bank Nifty moving up by about 300 points. And that will again change the sentiment. So, what you can say that it is a sector rotation. You have seen in the last 2.5 days, in fact the things have started moving up on Friday, in the new series, we have seen Nifty up by almost 200 points without Bank Nifty participating or maybe I would say that on the Bank Nifty contributing on a negative basis. So, maybe the things can start from tomorrow, day after, as I said, I will not be surprised to see the Bank Nifty moving up by 250-300 points in a day. So, I will not be surprised to see that positive bias returning back on Bank Nifty from tomorrow, day after, so there is no reason because the kind of weakness which you see on Bank Nifty is less than 100 points on and absolute level of 18,000-18,500, this double digit weakness is not material at all.
So, keeping my positive bias on Bank Nifty as well. But maybe on a longer-term because if you see the situation going forward, you are going to see MSS coming in. You are going to see the rate cut coming in. Both will happen on or before December 7. So, that will again on the expectation of that, again you can start seeing the positive bias start building up, so I will not be advising going short on the Bank Nifty. Maybe the brave traders can start accumulating long positions now only on the Bank Nifty if not for the December Option expiry, at least in the future with expiry of December 29.Anuj: Any thoughts on these stocks, Adani Power or JSW Energy ? For the last two days, we have seen a bit of a buying in these two stocks. A:
Keeping a positive view on JSW Energy, but not on any other stocks like Tata Power or Adani Power because if you see the JSW Energy, debt position, financials, margins and all that, they are seen to be more stable than all these other companies like Tata Power, Adani Power, they have the imported coal component and the weakening rupee that will be a pass-through, but the near-term margin pressures will all be seen or maybe the liquidity pressure. So maybe JSW Energy qualifies a good buy amongst that space, but I will not be going for any other stocks in the space.Sonia: The midcap index has been doing better for the last few days. Any fresh pockets or stocks that you have identified where long-term investors can look to put money now?A:
In fact, auto ancillary looks very good and maybe if you go in that space, Rane Brake Linings, Harita Seating Systems, Rajratan Global Wire, these are stocks which are having very good potential. Maybe the kind of earning growth, one can add the Subros in that category, one can add Pricol.
So, I am quite bullish on the auto ancillary space going forward, number one, number two sugar, as I have been saying that sugar stocks, because with the crushing or maybe with the recovery seen with many of the UP mills, better than last year and the prices of the sugar cane having declared quite low. People probably can look for a gain of about 30 percent return on these sugar stocks by March, 2017 even after having risen by about 25 percent in this last couple of weeks. So, two themes as of now, auto ancillaries and sugar on a select basis.