Berger, Madras Cements to see 5% returns next week: Tulsian

Market's focus next week will be on auto sales and cement sales data, these are likely to be next triggers and could decide market's direction going forward, says SP Tulsian of sptulsian.com.

According to him, since real sensitive sectors like real estate and banking are in a weak mode, any respite in cement sales can turn interest of traders towards cement stocks. He is not negative on auto stocks and suggests buying Mahindra and Mahindra (M&M) and Maruti on dips.

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Meanwhile, Tulsian expects ADAG stocks like the Reliance Communication and Reliance Power to remain weak in next week.

He is bullish on Berger Paints and Madras Cements and expects 5-7 percent and 6-7 percent of return on these stocks respectively, next week.

Below is the verbatim transcript of SP Tulsian's interview on CNBC-TV18

Q: Key events like the earnings season is now over, Q4 gross domestic product (GDP) numbers are out of the way, so what are the triggers to be watched out for next week?

A: I will be closely watching the auto sales numbers and cement sales numbers and both will be out in the next three days. On June 03, we are starting the week so by that time we will be having all those data’s in front of us and that will give direction to the market. This is because if one sees the rate sensitives, real estate and banking are in the weak mode.

If we have some kind of respite coming in from the cement sales numbers, the cement stocks that are listed in plenty can be area of interest for traders and second would be the auto, because I am not keeping a negative stance on the auto. In fact, the corrections that we have been seeing in Mahindra and Mahindra and Maruti specially, are giving a good entry point. Same thing can be applied for two wheelers also despite having seen a good run up in the Hero Motor last week. So, these are the two events which should be closely watched.

Q: You have a couple of ADAG stocks in your recommendation list for next week – are you being gutsy or is there a more technical leg up for stocks like Reliance Communication and Reliance Power?

A: Next week, out of five days, I am expecting three days to remain weak and two days to be subdued. But considering the weakness in the ADAG stock- Reliance Communication and Reliance Power both look very weak. Reliance Communication largely because of the profit booking, there is a hangover of the 2G CBI asking the 2G court to issue summons to the chairman of the company along with his wife so that will be a big hangover. The kind of run up that we have seen in the stock in the last 45 days, where the stock has more than doubled, may tend people to go for profit booking including the liquidation of the long positions as well.

Similar is the case with Reliance Power, also the kind of restructuring news for their Sasan ultra mega power projects will not go well with the market. The kind of shift that people will take from Reliance power to other power stocks like Tata Power and Adani Power, JSW Energy looks better in that space. Even the liquidation of long positions that got created in this last one month in the stock may also been seen so keeping the negative stance on both the ADAG stock for the week.

Q: Do you have any buy calls for next week?

A: Yes. I have two buy calls. One is Berger Paints and the other one is Madras Cement. Largely, the effect of this subdued performance. Though I am not disappointed with the numbers posted by both the companies, profit booking is being seen in both the stocks. But, paint company has been my favourite. I have been keeping a positive stance and Asian Paints and Berger Paints, both are preferred bets from that space.

Berger Paints having corrected, can again give a return of about 5-7 percent in the next one week and similar is the case for Madras Cement. We have continuously seen informed buying coming into the stock which made it to move to Rs 260 but now it is ruling close to about Rs 222 to Rs 223 which makes it a very good entry point for a gain of about 6-7 percent in the next week.