Banking Bill: SP Tulsian sees positive impact on pvt banks

The Reserve Bank of India's (RBI) move to keep the CRR and repo rate unchanged disappointed the street, especially banking stocks. Most of them slipped in trade post this annoucement indicating pessimism in the market.

Meanwhile, SP Tulsian of sptulsian.com told CNBC-TV18 that passage of Banking bill will have postive impact on some private sector banks. "Keep few private sector banks on your radar now, " he suggested.

Below is an edited transcript of Tulsian's interview on CNBC-TV18.

Q: What would you attribute to the sudden intraday reversal that we have seen in the markets?  Is the optimism due to the fact that the banking amendment bill would possibly come through?

A: Yes, I think that is the only optimism. Post Reserve Bank of India (RBI) policy there was correction of about 75-100 points on the BSE Sensex. The moment Kamal Nath said that the government has agreed to drop the forward contract clause from the banking amendment bills, the only condition of BJP, if that gets dropped then they will allow the banking amendment bill to pass. So that had its direct impact on the Bank Nifty, which was in the negative after the RBI’s announcement and has turned positive. The main reason is the banking amendment bill. But we never know whether the government will go ahead or not with all these developments. These kind of announcements have a direct impact.

The second point is Hindustan Zinc, where the Law Ministry, Mine Ministry is opposing it for the residual stake sale and we saw the stock correcting. So, all these political developments are having direct bearing on the market and individual stock behaviour.

Q: Do you see the banking bill being passed through today? How much more of an incremental impact will it have on the markets?

A: If you go by the demand of BJP and if the Congress agrees to drop the forward contracts because the Congress has said that it was just an enabling clause. It is not necessary that all banks will get indulge into the forward contracts or maybe forward trading. That was just an enabling clause and even if it gets dropped I don’t think contours of the banking amendment bill would have changed. It is good that the government has agreed as it will now pave the way for passing of the bill.

I see a positive impact on the private sector banks, because a majority of provisions have already been factored in, whether you talk in terms of the new licencing prospects or the many companies being seen as a beneficiary. From hereon, there are 8 to 10 private sector banks which are seen as a takeover target and once you have the clarity coming in with respect to the shareholding ownership, definitely there will be change of hands of maybe four-five banks which are being discussed in the circle and that will have a positive impact. Maybe keep a few selected stocks on your radar from the private sector banking space where the upside movement is still likely to be seen on the passage of this bill.

Q: What do you think of the continuous up move in most of the metal names? Most of them have rallied close to 8-10 percent in the month of December. How much more of an upside would you give any of these individual metal names?

A: There are 2-3 reasons for the metals to move up. First as a sector rotation, the metal sectors have been remaining depressed for maybe last 2-3 months. The valuations have taken a beating whether you consider ferrous metal or non-ferrous metal.

Consider Hindalco, it fell to as low as Rs 110, Steel Authority of India at Rs 80, Tata Steel at Rs 350-360, Bhushan Steel at Rs 450 and even Hindustan Zinc at Rs 130-135.

This is a sector rotation number one. Number two, the China factor has really given a boost to the entire metal space and in spite of the rupee weakening; generally weak rupee is positive for the non-ferrous metal because the selling price are derived on the Import Parity Prices based on that and in spite of the weak rupee the stocks have not really gained in the last 2-3 months.

So, a combination of all these factors is reviving the interest at the lower valuations as a value buy in all the stocks. I keep my positive stance more on the non-ferrous metal, maybe on the stocks like Hindalco, Sterlite, Sesa Goa because even Sesa Goa will be in a new avatar. Sesa Sterlite will be having a good non-ferrous metal presence. One can expect an upside of maybe 4-5 percent from hereon in all these stocks.

Q: There are 18 underpeforms on BHEL versus three buys at this point in time. We had CLSA which has come with a contra buy on it or has put it in its portfolio with a three percent weightage? What is your view on BHEL and would it be a contra buy for you as well?

A: With a view of three to five years, I will keep a positive stance on the company because if you see the PE multiple of about 8 to 9 on the historic earning and if you go by the present market value of less than Rs 230, there is very limited downside. In the earlier correction we have seen the stock settling to about Rs 210 then thereafter it moved to Rs 275. I will be keeping my positive stance from a three to five year prospective. But if you want to take a short-term view of maybe six months, you should buy below Rs 225 and can look to exit at about Rs 260 that will be the wide range. The downside risk reward is more favourable for buying the stock at the current level.

Q: Where would you stand on Indiabulls companies like power, infrastructure, or finance?

A: I won’t be keeping a positive stance on any of the stocks except maybe Indiabulls Finance and Indiabulls Real Estate because whether you talk of the Indiabulls Power or maybe other stocks with respect to that, which have emerged from the restructuring moves and all that either too small or there are is no significant progress on the business front. So, I will keep myself away from all the stocks except Indiabulls Finance and Indiabulls Real Estate.

Q: Any view with regards to Axis Bank and the fund raising?

A: Fund raising is very much required by all the banks and they have taken the right decision. Any dilution of the equity is always seen negative by the market in the near-term. So maybe a level of Rs 1,310 could be seen in the stock where again the stock should take a good support and from thereon start moving up.