SP Tulsian advises to stay away from Nifty, suggests bets

In an interview to CNBC-TV18, SP Tulsian of sptulsian.com advises investors to stay away from the Nifty. "We are in the middle of the market. One can expect 75 point plus or minus, maybe a level of 5770 or 5950, because it is very difficult to make money on both the sides," he adds.

Also read: See 25bps CRR cut from RBI in December: HSBC

Below is the edited transcript of Tulsian's interview to CNBC-TV18.

Q: What do you think has resulted in the markets actually coming off the day's high?

A: Largely, there’s no conviction at the higher level. I don’t think anybody really has the courage to go beyond 5900 or 5950. If you see the sector calls also, whether it is pharmaceutical, FMGC, cement or metals, all of them are finding it a little tough to resist or break its resistance beyond a point.

Some interest is now seen in the real estate stocks or maybe stocks like non-banking financial companies (NBFC). They are not truly reflected in the indices. Infact, largely we have been seeing profit booking.

Can someone go really short at these levels is the question We are in the middle of the market. One can expect 75 point plus or minus, maybe a level of 5770 or 5950, because it is very difficult to make money on both the sides. So, it is better to remain away from the indices and look for ideas in odd counters or maybe in the non-indices stocks or the non-indices sectors.

Q: When you speak to people as well, how much of this trade is expecting any kind of a policy action on December 18th itself?

A: I am not too optimistic. Let us take two scenarios. First is the rate cut and second is the cash reserve ratio (CRR) cut. I don’t think that CRR cut is really desirable at this point, though we will be having the data tomorrow for the advance tax. Generally, after the advance tax, the situation gets squeezed because so much money gets squeezed out or goes out of the systems so that much pressure comes on liquidity.

I don’t think that liquidity situation is so grim or so strenuous at this stage. So, maybe CRR cut is ruled out. Inflation has been coming down.

Considering the current account deficit situation of USD 20 billion per month of which USD 15 billion is alone coming in from oil imports, I don’t think the RBI will be really comfortable. The rupee weakening or the pressure on the currency continues to remain, probably as a cautious move. There doesn’t seem to be too much hurry on part of the RBI because October IIP numbers have also been good. I don’t think the fear is still there, though the RBI is not too concerned for the growth. However, they won’t be in haste to go for rate cut because growth is as such coming in.

One could probably see a pause being taken by RBI this time also. I am not expecting a CRR cut, but the repo rate cut maybe expected in the month of January. I am expecting statuesque to remain on both for December 18.

Q: What have you made on the big moves we are seeing on Sesa Goa despite the mining ban in Goa and Karnataka? Sesa Goa has not really corrected and today as well it is holding up quite well.

A: I am maintaining my view on Sesa Goa as positive, largely for the reason that the new avatar of Sesa-Sterlite will be emerged in the next one month or so. We have seen the process of the merger getting completed. In the Sesa-Sterlite scenario, you will be having 64 percent stake in Hindustan Zinc, 51 percent in Balco, 35-36 percent in Cairn India. They have their iron ore mines. Sterlite Industries have their copper business. Apart from that they have Madras Aluminium Company, which is now an unlisted company, also getting merged.

So if you see the combination, it will emerge as a natural resource company. Hindustan Zinc is already a Rs 5000 crore profit making company. If you see the equity base of Sesa-Sterlite, that will be quite low, it will not be more than Rs 250 crore.

The only problem in Sesa-Sterlite merger will be Vedanta Aluminium. However, even in that company, the losses that they used to provide earlier, about Rs 1500-2000 crore every year, have already stopped. Atleast now, things are coming on a breakeven level. So, the huge cash flow of Cairn India and Hindustan Zinc will really be a big driver and it will be wrong to take limited or narrow approach on Sesa Goa from iron ore point of view. Iron ore will really be a very small portion in the merged entity of Sesa-Sterlite here on.

Q: Any credence to this rally that we have seen in infrastructure? Or do you think it is one of those one-day wonder things?

A: No, I think this will have its effect in a gradual manner. One should not really expect the acid reaction that only tomorrow we will be seeing the positive results coming in from hereon. One has to be very selective and the infrastructure companies that have the Build-Operate-Transfer (BOT) projects, have really got stuck more especially on the road front and maybe the on power generation front, they will really be beneficiary.

Consider land acquisition and add to it the National Investment Board (NIB). Companies like JP Infra, have 6,000 acre fully paid land and 55 percent of it is in the National Capital Region (NCR). I have not seen any positive effect coming in on that. There maybe some rub-off effect because JP Associates is holding 80 percent stake in JP Infra. This is just one example that we should not expect the positive effect coming in on all these stocks hereon. I am keeping my positive stance on IVRCL and NCC also, because from hereon, people will really be keen to acquire the projects and the companies who want to monetise their part of the project including Lanco.

Lanco has a 8,000 megawatt power generation pipeline, but the only thing we need to see is whethert the events are happening in terms of the monetisations, financial closure or in terms of the further progress being made by these companies. We will keep hearing about this in the next couple of months. So I have a positive view from hereon. Atleast, the negative perception, which has been persisting on all these stocks should stop from hereon.

Q: Your quick comments on what you heard from the finance minister especially with regards to the under recovery on petroleum products?

A: A lot of confusion persists even at the government level. Nobody is clear and that is a reason we are not seeing the original estimates anytime getting adhered to. That is the reason, we are seeing quarter on quarter basis kind of things, coming in the form of sharing by the upstream and even the Adhoc release by the government. If you see the oil marketing companies’ health, that is really deteriorating. That is not a prudent accounting policy where you see first three quarters of the oil marketing companies posting their bottom-line in negative and in the fourth quarter, you see the entire bottom-line of the losses getting covered in the form of the contribution by up-stream and government.

A lot of confusion persists because of the volatility of crude and because of the financial crisis happening at centre also. They look to postpone the release of their contribution as late as possible. The situation is likely to continue. I don’t think any government will really be able to put the subsidy sharing burden of the oil sector on the track on a quarter on quarter basis or on a regular basis.

Q: Where do you stand on FACT?

A: I am not convinced with this stock in any way. Infact, FACT is a loss making company. They have been seeing continuous fund infusion, but because of the punter move and maybe because of the low float of this stock in the market, we are seeing this kind of up-move. However, this will really be a trap for the short-term trader. So, I would say it’s a clear avoid for everyone.