Check out: Tulsian's top bets as winter session starts

SP Tulsian of sptulsian.com spoke to CNBC-TV18 about the winter Parliament session and why he thinks there is a hope from the FDI in retail. Tulsian feels the session will be lukewarm and nothing positive can be expected.

Tulsian bets on Pantaloon Retail, Shoppers Stop and Trent this winter session.

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

Q: What are your expectations for the first few days from the Parliament session that starts tomorrow?

A: Some positive can be expected from the FDI in retail, maybe the retail stocks. This is because of the no confidence motion and then no support from the other opposition parties for the 'no' confidence motion even though they agreed to oppose the FDI.  Also, there doesn’t seem to be much steam with the opposition once that goes through, probably that will be quite positive for the retail stocks.

So, one can take a call on the stocks like Pantaloon Retail and maybe some cash-traded stocks like Shoppers Stop, Trent and there are 8-10 smaller retail stocks available in the cash segment. So, one can look to play or take a positive call on those stocks. Except that I don’t think there will be any positive outcome. The whole four-week session which is expiring on 20th December, is likely to be subdued.

Things are likely to be lukewarm, nothing positive can be expected though many of the legislations are lined up for consideration by the parliament. I don’t know how far this parliament will be running and how far serious business will get transacted. So, I am not expecting any positive outcome from this session as well, apart from some positive bias on the retail stocks.

Q: Your view earlier on the November series was not particularly optimistic. Do you still think in the last 10 days of the series the market could head lower?

A: Yes I am keeping my view intact. I have been taking a call of 5450 on Nifty and maybe 10800 for Bank Nifty. But Bank Nifty intermittently is showing some regain. Once you see the index getting corrected by 200-300 points, again it starts moving up by 50-100 points which we have seen today.

I am keeping that same stance; it may not hit the 10800 but will be able to hold 11000. I am expecting it to breach 11000 and maybe the Nifty at the level of 5450- 5500 by expiry because even after the start of the Parliament session we have exactly one week for the expiry of this November series and that could be a bit negative for the market.

We may see some profit booking coming in, in fact the overseas money flow has started tapering off maybe because of the weakening of the rupee. At that stage the money stops coming into the market, so overall no positive triggers are seen for the market for next one week or so starting from tomorrow and I am expecting mild weakness to come into the market. So, same levels 5450-5500 on Nifty and below 11000 for Bank Nifty.

Q: Today, real estate stocks like Peninsula Land, DB Realty did quite well. Among these, which one would you plumb for?

A: I am keeping my positive stance on Peninsula Land; I have been advising that since yesterday when the stock corrected to the level of Rs 62-63. That looks quite promising because if you see the big run up, which we saw last week, since then – practically all the real estate stocks whether DB Realty, Peninsula Land, HDIL, Indiabulls Real Estate or Orbit Corporation. Those who have a strong presence in Mumbai have all been witnessing the profit-booking.

One cannot really say that the breakdown has happened into the stocks or maybe the negative perception has started building up. So, the positive stance continues to remain and my positive stance is on the Peninsula Land. If you really want to pick one stock from the Mumbai market that should be Peninsula Land and from the NCR Region, it is Anant Raj Industries. So, these are a few stocks where one can still go long in spite of seeing a good run up today.

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Q: Cipla had a good run, Rs 387 now. Would you rank it as one of your top buys in the pharmaceutical space?

A: Yes considering the Q2 numbers, you definitely put Cipla into the top league of the pharma companies because the kind of performance they have posted for Q1 as well as in Q2 is really surprising. Going by the recent news, I am unable to understand the logic, marketing company has acquired on the topline of 2X and the bottomline of 11X.

Sometimes if that company, Cipla Medpro is only marketing the products of Cipla I am unable to understand the logic of paying USD 440 million for acquiring 100 percent or maybe that kind of valuation. Can’t this company create their own marketing outlay if ultimately the survival and earnings are made by the Cipla Medpro from the products of Cipla only? So, this acquisition is quite expensive for a marketing company at topline of 2X and bottomline of 11X.

Overall my stance remains positive but the problem with Cipla is that whenever we see the stock moving to Rs 405-410, stock swiftly starts correcting maybe in the form of profit booking and again moves back. So, probably for the time it is likely to remain in the range of Rs 375-410. In fact, I was expecting the stock to breach the resistance of Rs 410-415 after seeing their Q2 numbers where they posted a PAT of close to Rs 500 crore. Probably, it will breach that and move into a new range of Rs 410-430. That has not happened, but there is an overall positive stance on the company.

Q: Are you bullish on L&T Financial Holdings? Why has the stock become so popular again?

A: Last week there was news that they are looking to acquire the Dhanlaxmi Bank and maybe in anticipation though the market was saying that the company’s prospects of getting banking license are very high. I don’t think the whole process of the allotment of the banking license will happen, atleast in the next 12 months because the guidelines or the discussion papers are yet to come out from the Reserve Bank of India.

There was strong news and we have seen good run up in the share from Rs 52 to as high as Rs 86-87. Whatever corrections we have seen in the last two-three days, fell to as low as Rs 70. Yesterday, we discussed that at Rs 72 it makes a good buy.

So, maybe again the stock can move to Rs 83-84 and probably the range for the stock is likely to remain within Rs 72-84-85. It is likely to remain in that range unless we have some crystallise confirmation coming in on the acquisitions in respect to the Dhanlaxmi Bank which is again moving or floating in the market.

Q: What do you expect from United Breweries Holdings? Do you think the latest news regarding the selling of stake in UB City coming out of the Vijay Mallya stable is correct? Are they only newspaper reports or do you think Mallya will take decisions around that?

A: It is certain that Vijay Mallya has to look for monetising assets of maybe USD 500 million or more. He can look at the real estate property because UB Holding is holding good chunk of developed properties. The company has entered into a joint venture (JV) for joint development couple of years back. In lieu of that development, they got the developed property which we now hear is from PE investors for Rs 500 crore plus.

So, I am not ruling out that possibility because Mallya has to mobilise the fund of USD 1 billion to pump into the Kingfisher Airlines to make it feasible for any prospective buyer to come and take stake in the Airlines.

Secondly, with respect to other asset monetisation, which one can include as stake sale in company Mangalore Chemical is also not ruled out. The only apprehensions to the market is that whatever amount is getting mobilised by UB Holding, the promoter of Kingfisher Airlines, they have fear that in spite of such a huge mobilisation of funds by UB Holdings it will entirely be used for repayment of the liabilities of Kingfisher Airlines, shareholders are not going to get any dividend. That worry is keeping the price subdued.

Until yesterday we have been seeing the stock correcting post Diageo deal. There is no justification if UB Holdings is having 2 crore 40 lakh shares of United Spirits or 3 crore shares of United Breweries Limited, which has a very huge chunk and huge value. There is no reason for the UB Holdings stock to correct. At least now the fall has been arrested and maybe in the near-term, maybe next week the stock will come back to Rs 125-130 where it should stabilise.

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Q: What are your views on a particular stock from the broader markets – Honeywell Auto, which is down around 20 percent odd today, whereas the management has chosen to go via OFS and cut its stake as opposed to delisting? What are your thoughts on Honeywell in terms of fundamentals and whether one should accumulate at current prices?

A: Whenever the promoters have opted to reduce the stake, the shares have taken a strong dip. The case in point has been with respect to the Fresenius Kabi Oncology, where a couple of months back the same thing has happened and for once the promoters have opted to exit from the stock. Day before, we saw that happening in the Disa India too.

So, probably with the stake getting reduced I don’t think there is any reason for anyone to buy the stock now because if the promoter holding is reduced to 75 percent there is no delisting theme or delisting flavour catching on. The next 3-4 months will remain quite crowded because the compliance of the threshold or the promoter’s holding has to get reduced to 75 percent by June 2013.

We will see these things happening, wherever the promoters will opt to go for delisting. We will see a good run up happening in those stocks and wherever they opt to reduce their stake to 75 percent, we will see the stock getting corrected and same thing is happening to Honeywell Auto. So, I won’t be advising anyone to buy the stock even at this fall of 20 percent.

Q: In case of NTPC, where do you see the divestment happening? Perhaps, at what floor price and how would you trade it now?

A: I have always been taking the call that this will be sensible on part of the government to look for divestment in NTPC and NMDC. In fact, NMDC is having a market cap of Rs 75000 crore and NTPC is having a market cap of Rs 140000 crore where the government can mobilise a substantial amount of money. By divestment of 10 percent stake in both these companies the government can mobilise Rs 20000 crore plus for meeting their divestment target of Rs 30000 crore.

I don’t think there is any justification or economic prudence in respect to the sale of the stake in maybe BHEL or Steel Authority at such a depressed or beaten down valuation. So, this seems to be a good move but that won’t give any upside flavour to the share price. The best part is that in respect to the NTPC and NMDC, atleast I am expecting that overseas investor’s appetite is going to remain there because as of now the ownership of the overseas investors is quite low even in NMDC and same thing in NTPC.

So, I hope this process carries on which is seen to be quite positive but will not be seen in any way positive for the NTPC. I am not holding any positive stance on NTPC because there are better plays available in the power generation space like JSW Energy or maybe Tata Power over NTPC.

Q: To what do you attribute this 2.3-3 percent knock we saw in BHEL?

A: This is usual because if you see overall for the capital goods sector I don’t think any kind of optimism is building up. A few days back, Crompton Greaves moved up by a couple of percent. I thought maybe correction in the capital goods sector has started. But at least Larsen and Toubro (L&T) has shown that it has started moving upwards.

So, over cautious stance and sometime you see the position getting shifted form BHEL to L&T. Last week it was other way, L&T was correcting and BHEL was going up. So maybe a range of Rs 220-230 will remain for BHEL till the expiry of this November series.