Earnings to reflect slump; bet on Pantaloon, TVS: Experts

Girish Nadkarni of Avendus Capital and SP Tulsian of sptulsian.com believe that the fourth quarter earnings season will reflect the slowdown across the economy. Tulsian advises investors to bet on Pantaloon and TVS Motor.

Below is an edited transcript of their comments on CNBC-TV18 Key equity benchmarks ended a listless day of trade in the red. The BSE benchmark Sensex ended down 12.45 points at 18437.78, after touching an intraday high of 18,504.48. The NSE benchmark Nifty closed down 10.30 points at 5542.95.
Sudarshan Sukhani of s2analytics.com does not recommend any strategies. "The markets are in a very narrow range and choppy and investors are advised, as far as possible, to stay away. The only scalping strategy was to sell after a 20-point rally and buy after a 20-point dip. It is not necessary that the market offer rewards or excitement everyday," he told CNBC-TV18.
Girish Nadkarni of Avendus Capital says that earning will reflect the general slowdown in autos, a few consumer companies, banks and telecom companies. "The only sectors whose earning will probably meet or slightly exceeding expectations are IT and  pharmaceuticals."
Regarding the impact of a probable quashing of Bharti Airtel's summons to the 2G trial court by the Supreme Court hearing, SP Tulsian of sptulsian.com says that the setting aside of the summons by the Supreme Court will be a big positive. "The counter has been quite short and the last time the stock corrected it recovered from the level of Rs 278-280. This could be termed as a good support though the stock corrected intraday by Rs 268-269 also. So, the Supreme Court’s decision could make the stock move closer to Rs 298-300."
Tulsian explains that an unfavourable decision by the Supreme Court will not be seen as highly negative by the market. "The share could correct by about Rs 10. The limited negative market reaction is due to the confidence shown by the overseas investors in the company. The bottom of Rs 268-270 has been tested. The risk reward is in favour of going long on hopes the apex court’s decision will offer positive relief."
On the fall witnessed in Manappuram and Muthoot, Tulsian ascribes the cause to be the fall in global gold prices which has dented the rupee."Bullion experts are of the view that gold will remain weak on renewed interest in the dollars vis-a-vis gold. The considerable run-up in gold has come to a halt due global liquidation and subdued delivery. So both companies face an increased risk of bad debts in the June quarter which previously was seen to be restricted to the March quarter." Pantaloon ranks high on Tulsian's list of recommendations. "Pantaloon can be bought at the current level for a gain of Rs 3.50-4 with a stop loss of Rs 2 lower than the buying current rate. The market expert also advises investors to go long on JP Associates due to huge trading volumes in which may be due to some large-scale selling “However, at Rs 64.50, the stock can be looked to for a level of Rs 68 on Tuesday with stop-loss at Rs 63.50."
Tulsian is impressed with Bharat Heavy Electricals' (BHEL) provisioning results. "With Rs 26.50 the provisional EPS for FY13 and ruling at a PE multiple of 7, the stock really makes a good buy. Recording an order inflow of Rs 31,500 crore for FY13 in such a  sluggish market is really remarkable and the order book of Rs 115,000 crore should put to rest any investor-concerns.  The shorts on the stock and the under-ownership could make the stock move quickly to about Rs 200 in next month." On the TVS pact with BMW, Tulsian is unsure and awaits the emergence of the broad contours. "TVS will have the advantage of ramping up its market share and it will be seen quite positive. But unless the broad contours of the arrangement are known it is difficult to take a call."
Banks such as Punjab National Bank (PNB) and IndusInd Bank witnessed pressure. Tulsian explains that the stocks are in the process of bottoming out. "Maybe the RBI's observations of some violation of KYC norms by the three larger banks, ICICI, HDFC and Axis Bank, have probably spread some element of fear But I do not think there will be further weakness. Investors could take long positions on ICICI Bank and YES Bank."
Tulsian recommends taking a call on Sesa Goa and Sterlite Industries together as both are to be eventually merged. "The negative bias on the metal sector continues to remain. I do not think a positive trading view can be taken on both. Investors could buy both stocks from a longer-term perspective." Mahindra Holidays fails to impress Tulsian. "No upside has been witnessed in the stock. But I do not think there will be any problems regarding the IPP." Jet Airways breached the Rs 500-mark well on the downside. Tulsian says that investors must remain aware, while taking a call on the sale of stake, that high levels of volatility will be seen. "I will not be surprised to see the stock again moving back to Rs 550 in the next 15 days. Investors taking a call should not remain passive and in case the stock does not move beyond Rs 630, they should look for a price of Rs 550-555."