Tulsian lays wager on auto biz, Thermax & govt action

Market analyst SP Tulsian, of sptulsian.com, explains to CNBC-TV18, in his analysis of the day’s stocks,that automobile stocks look most attractive.

Tulsian is also positive on Thermax thanks to the advance tax payment made by the company and adds that it is a quality stock for any portfolio.
He also expresses apprehensions regarding government inaction in August series as it is the ideal period for the government to implement initiatives such as the increase in diesel prices among others. CLICK HERE to listen to the market wrap with moneycontrol.com's Chelsea Saldanha.
Below is an edited transcript of the analysis on CNBC-TV18. Q: What have you heard about the cause of the carnage in the mid-cap segment? Can we expect more instances of a 20% sell-off in liquid stocks?
A: The situation of the liquidation in margin calls was created because a month ago there was a IB report which named six or seven stocks for speculative activity based on which SEBI has taken this initiative.
Secondly, with the F&O exclusion is in full swing with the rollover being scheduled for today. So many of the stocks given as collateral for the so0called operator activity in the F&O segment are not being accepted because the F&O shares are also getting excluded though these stocks, which have corrected today excluding Tulip Telecom.
Though the stocks are non-F&O stocks, but since they have been given as collateral for the trades carried out in F&O segment, the financier is not very comfortable in taking these stocks as a security.
Thirdly, it is common knowledge that there are at least 10-15 operators who control 5-6 stocks and hence control 4-6 companies. So if all at once face trouble for a stock, then there is a spiral effect of the prices on all their holdings.
This is a classic case of the margin call getting triggered and unless and until promoter arranges for all the funds, it is difficult for the stocks to survive this carnage. Maybe the stocks will keep correcting and the moment the promoter arranges for the funds. he washes his hands off and the stocks will normalise. Q: What is your view on the initial tick regarding Arvind and how it would move?
A: The results are disappointing. But I think the share should take support anywhere close to about Rs 62-64 because I attribute the poor performance largely due to the Naroda plant.
The performance of the readymade garments unit in which the company holds 50% is reflected into the consolidated business. On Wednesday, it was reflected in Raymond too. So, all the readymade garments businesses have been taking a hit because there has been very poor off-take. So, that also must have been the reason for poor contribution on a consolidated basis. Q: What is your view on JSW Steel?
A: Unless and until we know the consolidated PAT and the forex losses which are very relevant, it is difficult to take a call on the company. But considering the prevailing topline and the margins, I think the results don’t look to so bad if we consider that a big forex loss element has been factored in while arriving at the consolidated PAT. Q: Of the 10-20% the stocks that have been hit, do you see any kind of an opportunity either in the short-term or long term?
A: There are opportunities, but one has to really be very selective. When the margin call or the margin pressure problem is resolved, the stock will come out of the either lower circuit or from the bearish trend and that is the point where investors can really lay their hands to making an entry.
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Investors need to be very rational in taking a fundamental call on all those stocks. Secondly, investors need to be very selective and thirdly, deciding the right entry point, the correct entry level. So, I am not saying that there are no opportunities in all those stocks, but investors have to be very selective. Q: You were also sounding a bit apprehensive about the August series. Do you see more downside as the series unfolds?
A: It all depends on the government’s initiative after the Vice-Presidential elections. I am hoping that the government will initiate the hike in diesel prices among other initiatives hike. If nothing happens, events could turn very bad for the August series. Q: Would you continue to buy or hold some of these cement stocks after looking at the results that Ambuja Cements reported?
A: Considering the September quarter results, which are traditionally always lower, I won’t be really taking a call on these stocks. But the automobile stocks look good and investors can look at Tata Motors and Mahindra & Mahindra.
Investors need to take a forward call, because come August and September sales will start to pick up ahead of festivities and cause all kind of corrections. So, I may keep away from cement, but will look to buy automobile stocks. Q: What did you make of Thermax's results and where do you see the stock headed?
A: All the capital-goods results are expected to be poor. More mid-cap, capital-goods stocks like ABB, Siemens and Thermax can also be placed in the same category. The hint regarding the advance tax payment made by the company has increased my positive view on Thermax.
But if it corrects by about Rs 30-40 one can initiate a long, but otherwise it is a quality stock that can always remain in your portfolio. So maybe buying can be initiated at Rs 470-475. Q: Tomorrow, some of the interesting stocks that you track are announce their results. These include Thomas Cook, United Spirits and TVS Motors. Is there anything special you expecting from them?
A: In Thomas Cook, I think the run-up is already over as the open offer yesterday closed at Rs 65.48. So, now the stock will correct to about may be Rs 50 after the buyback.
Similar is the case with TVS Motor on which I don’t think there is any hope. I think the performance of both United Spirits and United Breweries is likely to remain muted.
There are other triggers for both these UB Group stocks to move such as the stake sale contemplated by the market. So, I don’t think that one can really expect any kind of positive surprises from these three companies.