SP Tulsian of sptulsian.com, tells CNBC-TV18 that the time was right to take a selective call on public sector banks. Some of his picks are IOB, UCO Bank and Andhra Bank.
Tulsian is also positive on Petronet LNG with the PNGRB rejection of the government's plea. The market analyst points out to the re-bound quality of JP Associates and says that the fine imposed by the court would not affect the stock.
BHEL remains inexplicable to Tulsian who adds that the market either holds the stock in high value or regards it as the weakest. Except for IVRCL and Nagarjuna Construction, Tulsian holds an overall negative outlook on the infrastructure sector.
Below is an edited transcript of the interview on CNBC-TV18. Also watch the accompanying video.
Q: What is your reaction to Petronet LNG’s move today on hopes that the PNGRB might not impose a cap on marketing margins?
A: The move is definitely positive as PNGRB clearly said that the decision does not fall in its jurisdiction and has rejected the plea of the government. So this is an overall positive for all the gas carriers but more so for Petronet LNG which has been buying and selling a lot of LNG.
Investors should overcome their fear on the stock and look at the company’s expansion plans. The company will start its Kochi terminal in the next six months or so, so that is a big positive. I think gradually the share will return to about Rs 160 in the next 30-45 days.
Q: How do you approach stocks like JP Associates which have, of late, been on a bad ride? Can you take a valuation call and buy the stock at Rs 65 because just a few days ago the stock was at Rs 85?
A: When SEBI had implicated the promoters of the company on insider trading three-to- four months ago, the share corrected to Rs 52-53 from Rs 56-58 only to quickly bounce back and return to Rs 80-85 even.
Having witnessed this kind of volatility, one can safely say that Rs 60 looks to be a strong support for the stock on technical as well as on fundamental grounds.
Yes, Monday's news about the Rs 100 crore fine has been very negative, but I am not too disturbed with the fine imposed by the court, as it was towards not allowing the company to set up a 62 MW captive power plant.
But I think still if you take a valuation call, it's a hybrid company with presence in engineering, construction and cement. So Rs 60 looks to be a strong level to make a buy. With a view of three months, I think the risk reward goes in favor of a good amount of returns in that time horizon.
Q: What do you think is going on? Are shorts re-engaging? Is it global selling? What's your sense of the quick turn back that we have seen after Monday's rally?
A: I think the shorts are getting re-initiated at these levels. On Monday there was no conviction, but I thought that probably the rally will continue because the shorts were seen and both the bulls and bears were confused.
So probably Monday offered an indication that the bears will continue with that short covering. But I don't think that’s really happened. Any weakness now is to do more with the fresh shorts getting initiated at this level.
Q: What's the problem with BHEL? It becomes the first stock people sell when the market starts to go down. Even at Rs 200-210, the stock is unable to find significant support barring the short covering rally on Monday? How much longer do you think this pain will continue?
A: Honestly, it is a mystery. On a technical call, I don't think that any fundamental analyst will really be convinced with this kind of valuations. In a worst-case scenario, the PSU will post valuations of Rs 225-240, but we have seen that level getting breached.
So probably the shorts seem quite huge in the counter and the problem in case of PSU stocks is that there are no incentives. There is no indication a return of informed buying in PSU stocks. So until then there maybe a sharp reversal or a sharp upsurge of maybe about 5-7points, which will be a big trigger where the stock can really move by 15-20% maybe in a week or so.
I think the market has concluded that probably this is the weakest or the best stock to go short because the stock is not likely to see any recovery and hence the weakness in the counter.
Q: What would you make of some of the public sector banks and the manner in which they have collapsed over the last few days? Do you think they could fall further?
A: One can take a selective call now. Take the case of IOB. I don’t think that there is any reason for taking negative call on that stock. One can even take a call on UCO Bank from hereon in spite of the flat or maybe slightly subdued results. So yes, one needs to be a little picky and choose. Another choice could be Andhra Bank.
If you take a call on the results being declared in last three days, I think these three stocks look quite good for picking up maybe on a correction or a fall of 2-3% further from hereon.
A: Infrastructure stocks have been languishing for the last one week probably on no signs of the interest rate softening and no benefits accruing from the build-up in short-term trade. Honestly, I don't see any hopes of again revival except for maybe two stocks, IVRCL and Nagarjuna Construction.
Those two stocks seemed to have bottomed out to level where one could initiate fresh buying. Except for these two stocks, I maintain an overall negative view on infrastructure stocks.