Diesel-price hike likely on Mon; Bet on BHEL, ITC: Tulsian

Tulsian is also positive on BHEL as he is optimistic that the coal-block allocation scam will be swiftly resolved and any cancellation of orders will be quickly restored. The stock analyst opines that ITC has little to fear from the government's proposal to introduce plain packaging of cigarettes as it will not see the light of day. The stock which is ruling at around Rs 260, may fall by Rs 3-4 before it gains strength.

Below is an edited transcript of the analysis on CNBC-TV18.

Q: Do you know why West Coast Paper Mills is down 8%, despite reports about International Paper buying a stake into the company?

A: The denial from the management came in the afternoon and if you see since the morning when the market opened, the stock has been registering huge volumes and that indicates the onset of profit-booking after the purchases over the last few days.

So even if we presume that the news is true and the stake-sale is likely to go through, here will be a lot profit-booking in the stock due to the huge amount of  trading and positions of short duration being initiated on the stock.

Whenever you see this kind of correction, it is an indication that all the weak hands have moved out of the stock. So, the correction is mainly on the denial of the news by the company and then initiation of profit-booking by short-term traders.

Q: What can you tell us about Motherson Sumi and the target you ascribing to the stock?

A: I am not too comfortable with the stock. There is no clarity regarding the status of the Peguform an European company that was recently acquired. The interest burden since the issue of the Samvardhana Finance Company was called off by the promoters continues to remain quite high. In fact, the stock has been witnessing some buying for last three-to-four days.

Though the CLSA has issued positive reports about the company, I will be cautious because the trading pattern of the stock is quite erratic - there is a surge in volumes for a week and suddenly, the stock dries up. Sometimes the trading volume falls to below 10,000 shares a day. So, the stock does not look too attractive at the current level after having seen a run-up of more than 10% in last week or so.

Q: What is plaguing Bharat Heavy Electricals Ltd (BHEL) which is down for the second day in a row and is one of the top losers on the Nifty today?

A: On Wednesday, fresh shorts were created on the stock and institutional investors initiated delivery-based selling largely on fears that there might be a cancellation of a lot of orders by companies on the CBI's list that have been either chargesheeted or whose affairs are under scrutiny.

But I refuse to buy into these fears or apprehensions as a clear picture regarding the resolution of the coal-block allocation scam will emerge over the next three days.

There definitely will be a re-auction and re-allocation of the coal-blocks. So there will be renewed interest in the coal blocks as the government is keen that the targeted power generation capacity of about 80,000 MW for the 12th Plan is achieved.

Though there will be a negative impact on the stock in the near-term, I maintain a positive outlook as on a fundamental basis, the share has an EPS of about Rs 28-29 for FY12 and on historic earnings, it is available at a PE multiple of close to Rs 7. So my investment call remains intact on the stock at the current level.