Caution-mode Tulsian picks infra, auto & realty

In his analysis of the day's stocks, market analyst SP Tulsian of sptulsian.com explains to CNBC-TV18 that he is cautious regarding any upswing in stocks across all sectors.

He wades through the heady infrastructure stocks and advises investors to pick shares that have a promising schedule of events in the pipeline. Tulsian is positive on the real estate market on the return of risk appetite in Mumbai, the National Capital Region and Bangalore.
Among the auto stocks, the market analyst advises investors to stay away from Ashok Leyland, TVS Motor and Tata Motors. Below is an edited transcript of the analysis. Also watch the accompanying videos. Q: It seems like infrastructure is the flavour of the day - HCC, Lanco Infratech and Crompton Greaves. How do you approach infrastructure stocks?
A: I'm a little cautious. I may not be too comfortable with a stock like Punj Lloyd or may be GMR, GVK on because of a lack of clarity.
I'm cautious on HCC because the stock is moving up on the debt recast plan and the picture that is emerging is not too comforting.
But yes, I'm confident on stocks like Sintex, Lanco Infratech or may be Suzlon because of the schedule of events. Arvind had been languishing for last two weeks on news of the strike at its factory at Naroda. But the stock recovered when the market received clear indications of a resumption of productions.
Similar is the case with Suzlon which is likely to meet its FCCB liability which falls due on July 28. A lot of pessimism continues to remain on the stock on apprehensions that the company may not be able to meet the liability.
But traders or short term investors need to have a little conviction. You cannot keep on swinging with the trend all the time.
So I am probably a little positive on sound infrastructure stocks despite the trend or expectations in the market. Crompton Greaves is a different ball-game in the capital goods sector on which I hold a positive view along with other stocks like BGR Energy and BHEL.
Investors need to differentiate infrastructure stocks into one group which needs to be treated with caution apprehensions and another which has stocks emitting high levels of confidence on the schedule of events lined up. Q: What is your view of the real estate market?
A: For last one month, I have been maintaining a positive view on the real estate sector in three markets- Mumbai, the National Capital Region and Bangalore.
My positive view is based on the return of the appetite for risk into these markets previously plagued by a lack of interest due to projects taking three-to-five years to complete.
The return of the risk appetite has been most evident in Mumbai thanks to the clear demarcation made between property under construction and property ready for use.
So, all companies which have proved significant execution capability are on my radar. Some of the stocks are HDIL in Mumbai, Anant Raj in the NCR region and Brigade Enterprise in Bangalore.
I keep my view positive on the real estate sector over the next six months. Q: Crompton Greaves is up around 4.3% and there is some restructuring that the company is undertaking in Belgium. How beneficial would it be for Crompton Greaves?
A: There are a few companies who have been a victim of European acquisitions and this group is led by Crompton Greaves.  Sintex follows because their big acquisitions in Europe have proved very expensive for them.
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If Crompton Greaves keeps sitting idle on its subsidiaries, nothing is going to happen and if you see the Q4 results, the company has not focused on its domestic operations.
The power distribution system segment of the company has really taken a beating with margins falling to 5% on a consolidated basis, while domestic margins were at 10-11%.
The exercise is in the right direction, but is slightly delayed. The restructuring should have been initiated six-to-eight months ago. There is no harm in going wrong with some acquisitions, but corrective action needs to be taken in time. Q:  How much of a negative could the taxes on cigarettes and for two tobacco items announced by the Uttar Pradesh government be for ITC?
A: Firstly I will praise Chief Minister Akhilesh Yadav for increasing the stakes. ITCs cigarette division contributes 40-45% of the bottomline.. So this will act as a trigger for booking profits by the traders on the good run-up in the stock in the last 15 days. ITC could correct to about Rs 245 where the renewed buying will start coming in. Q: Which one of the auto stocks would you be most cautious about now?
A: I will probably stay away from Ashok Leyland and TVS Motor on a lack of any trading or fundamental substance. The third stock that makes me cautious could be Tata Motors because the stock has seen consolidating in the range of about Rs 240-250 but the monthly performance has been little dull and not very encouraging.
I'm positive on Mahindra & Mahindra, Maruti and may be Bajaj Auto despite having posted dull sales in June. Q: Where do you see ITC stabilise at? It's at about Rs 250 right now…
A: I think it should take support at Rs 245 because that seems to be the level where the valuation call will again start to occur. So, investors could to buy the stock once it starts correcting at around Rs 245. Cautious traders can take a view at the Rs 242-245 levels. Q: What is your comment on the Orissa government have ordered cessation of operations at the mines in Keonjhar?
A: I don’t think that Jindal Steel and Power should really be having any problem in procuring the alternate iron ore. It already has a long term arrangement with the Sarda mines.
This is just a temporary setback. The setback will be mildly negative for the stock which could correct to Rs 430-435. Jindal Steel and Power has been getting weaker on a lot of negative news for the last one month.
The cessation of the operations at Keonjhar is probably a trigger for profit-booking. So, short-term traders could exit at Rs 430-435.