SP Tulsian of sptulsian.com, says that the auto sector is witnessing the worst situation in last eight-10 years where overall the sales are falling on a monthly basis in last 3-4 months.
SP Tulsian of sptulsian.com, says that the auto sector is witnessing the worst situation in last 8-10 years where overall the sales are falling on a monthly basis in last 3-4 months. He holds a cautious view on TVS Motor, Ashok Leyland and Tata Motors.
He is of the view that Jaiprakash Associates is a victim of combination weak outlook for cement and infrastructure space. Also no development with respect to sale of cement plant, which the company is looking to do for the last 3 months.
Below is the edited transcript of his interview to CNBC-TV18.
Q: Big knocks are coming in the auto space. Which stock is worrying you most in this space right now?
A: I have a cautious stance on players like TVS Motor, Ashok Leyland and Tata Motors. The ongoing correction in Bajaj Auto is surprising. Though things are not positive for Bajaj Auto but still on relative basis it has better standing compared to Hero MotoCorp as Hero witnessed some labour issue in the past along with dipping monthly sales.
The auto sector is witnessing the worst situation in last 8-10 years where overall the sales are falling on a monthly basis in last 3-4 months. So, stand was a bit cautious. Stocks like Bajaj Auto or Maruti Suzuki seems to bottom out. Some correction can be witnessed in Tata Motors as they have concerns on JLR front i respect of China norms and other factors.
Q: The behaviour of Reliance Infrastructure almost like a mid-cap. In last four days it is down about 18 percent. How would you approach the stock?
A: There are rumors in the market that Sahara involved large amount of funds into the market. Now since, Sahara is in the process of cleaning up their books and part of the money if has got diverted to this stock also.
I have been maintaining relatively a stable stance on both Reliance Infra and Reliance Capital. We are seeing correction in both Reliance Power and Reliance Communications as they have their own problem in respect to high debt or further borrowing, which they will be required to undertake.
These things were not expected in Reliance Capital and Reliance Infra. This could be one reason that apart form the high-beta nature lot of financing activity happens either from the informed circle or circles close to the management. Unless and until the entire quantity is exited on account of this funding or margin related things, till then we will not see these counters stabilizing.
Q: How would you approach HDIL which is now at Rs 47?
A: I won’t take a positive call on this stock as one has to closely monitor that no further selling takes place neither fro the promoter or margin funding. Generally, whenever there is any high FII holding happening and large investors once start exiting from the stock, whenever that happens, it always happens in huge quantity and no one comes to support the stock. At times this stock corrects in double digit so it is difficult to say that the stock has corrected.
On a fundamental basis, if I take a longer term view which I reiterated yesterday because of some relief coming in on some policy front or clearances coming in terms of Mumbai Airport project. If they are able to get a good amount of Transfer of Development Rights (TDR) then that can be a good trigger. It is difficult to take a call when the bank accounts are freezed by service tax department, they are unable to make interest payment of Rs 2 crore and all sort of things. So you need to keep the cautious view for the time being.
Q: What is your view on SKS Micro Finance?
A: It is very difficult to take these calls. Suddenly, we see 10-15 percent correction in stocks and everyday almost there are causalities in the madcap space.
Q: What is your view on Jaiprakash Associates?
A: JP is a victim of combination of things like cement is now ruling weak, has a negative outlook also the infrastructure space looks weak and there is no development happening with respect to sale of cement plant which they are in process to sale from last 3 months. Even investors are exiting the stock. All these could be attributed to the weakness.
Q: Sun TV is down about seven-eight percent. How would you approach it now?
A: Support for this stock can be seen at Rs 360 in the near term. One can buy this stock if it settles around this level. I think the stock can see further weakness by about 6-7 percent.
Q: What is your view on Reliance Infrastructure?
A: It is very difficult to take a call on Reliance Capital and Reliance Infra. Fundamentally, they don’t deserve to see correct so much correction. But it indicates that some hard press selling is happening maybe because of liquidity pressure which should be released from this selling and the selling has to get tapered off. So for the time being, one can look for a target of about Rs 315 where again the stock should be reviewed whether the selling has come to an end and the positive view can be taken there on.
Q: The SAIL offer for sale (OFS) pricing will be out later today. What is your expectation with respect to where the floor price should be and surprisingly the government has trimmed its offering, will now just offload 5 percent in the first tranche rather than 10 percent. What is your view on that?
A: I don’t understand the reason of going ahead with this; they have trimmed it from 10.8 percent to 5.8 percent. I don’t think that given the market’s circumstances and specifically the outlook on the metal sector – the floor price is likely to be more than Rs 60 and if that is fixed even at the level of Rs 60 it is bound to see very tepid response and probably Life Insurance Corporation of India (LIC) has to come to the rescue. So again, the destruction in the share price is seen in the near-term while the floor price will be fixed this evening.