Stay away from stocks with Parliamentary issues: Tulsian

In an interview to CNBC-TV18, SP Tulsian of sptulsian.com talked about which stocks to trade ahead of the all-important winter session of the Parliament. He said Bajaj Auto and Hero Motocorp make good trading buys at the current levels. However, he says it is advisable to wait and watch as far as L&T Financial Holdings goes. 

He is very bullish on the cement stocks and preferred to go with Ambuja and ACC. From the midcap segment, he chose Prism, Heidelberg, Mangalam Cement at the lower level.

Below is the edited transcript of his interview.

Q: Lloyd Steel is up almost 16 percent on the back of that deal with Uttam Galva. How would you approach it now? Would you take any bets on it at all?

A: This deal is being talked since last six months. If you see the entry of the ArcelorMittal in the Uttam Galva, it had an idea that they will not remain a converter. At present Uttam Galva is just making the Governor's Program for Gifted Children (GPGC). They are buying Hot Rolled (HR) and Cold Rolled (CR) coil from the other prime producers. They are only converting. So, that will not remain the business focus of Uttam Galva.

We have been hearing this deal happening from last six-eight months. Earlier, this we had in respect to the Bhushan Steel also that ArcelorMittal or Uttam Galva is seriously looking to acquire Bhushan Steel. Then that news was denied. If you see the status of the Lloyd Steel they are very small players. They have their presence in Wardha. They have very low capacity; half million tonne of HR coil and about one and a half lakh tonne of CR coil. The capacity will get rammed up, but I do not know how far that will be, looking at the financial health and status.

Whenever we have these news coming in, we see the stocks moving up by 15-20 percent. However, that does not leave any room for further appreciation. In fact same thing has happened for Uttam Galva also. Couple of years back when the deal has happened, Arcelor-Mittal came into that company. So, I will not be keeping very positive stance. One should not ride this exuberance. Maybe, those who are holding can look to exit at a price above Rs 15.

Q: What do you think is plaguing us in particular in the past two trading sessions? Or why is there such an underperformance for the Indian market as compared to the European markets? Is it that amount of trepidation ahead of the winter session kicking off?

A: I think it is the lack of any positive trigger scheduled for next one month. In many of the stocks, excluding the automobile names like Bajaj Auto, Mahindra and Mahindra, Hero MotoCorp and Maruti, we have seen the profit booking. The classical case for that is the cement stocks and the PSU banks. In fact, we have been seeing both these sectors getting tired at the upper level. They have not been moving up in spite of the big push or big buying coming in on the selective days. We have witnessed this in last one week. That has been keeping the upside restricted for these two sectors.

We have seen huge participations of the HNI or the fund in these two sectors. Now we are seeing profit booking coming in unless and until we see some corrections. I think in cement we have already seen that correction happening. We have seen Ambuja falling Rs 200, ACC falling below Rs 1,400, UltraTech Cement falling below Rs 1,800. So probably cement sector may see a quick bounce in the next couple of days. That may not be valid for the PSU and the private sector banking stocks. They are all holding on just where they have all been ruling. So, there is no incentive to go long because of the lack of positive trigger and the overseas funds.

Due to profit booking, things are looking dull. Even for making profit bookings, sometimes the holders or the investors are not able to find any exit. The moment they start selling a small quantity, one sees the stock getting corrected by two - three or four percent.

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Q: Would you have a view with regards to the national pharma pricing policy? What would that do with regards to stocks such as Lupin and Cipla?

A: Overall concern remains. People are expecting that probably the government will be very tough on the pricing policy. They will restrict or cap the pricing. In that category infact Lupin gets affected. I have not taken a close look on the individual company. However yes, the apprehension continues on the pharmaceutical policy meet.

Q: There has been a downgrade on TCS with a target price of Rs 1,140 from an influential brokerage. Currently it’s at around Rs 1,264. How would you approach TCS at these levels?

A: I do not think that this downgrade or maybe the upgrade reports really have an effect for more then a couple of days. Once the stock corrects to about Rs 1,200 or maybe Rs 1,210-1,215 again, we will see the buying coming back into these stocks. Today, all the IT stocks are down. HCL Technologies is holding its level but otherwise take a call on Tech Mahindra, TCS. Maybe, this will have the negative effect for couple of days. However, Rs 1,215-1,210 makes a good entry point.

Q: You track Amara Raja closely, what kind of an upside do you see there?

A: I will keep my pause on Amara Raja batteries. Maybe a correction of about five- seven percent and then Rs 240 makes a good entry level. The kind of run up and post that we have seen and stock split is happening which has made the stocks to run up huge. So, I will not enter into the Amara Raja at these levels. However, yes both the two-wheelers Bajaj Auto and Hero Motocorp makes a good trading buys at the current levels.

Q: Give us your view on L&T Financial Holdings. It is down about 9 percent, is this a good buying opportunity? Or given the volatility with respect to the banking regulations amendment act, you would want to just wait and watch for some more cues to come in?

A: It is advisable to wait and watch. I think if you take a specific call on the bank guidelines, it will not materialise, atleast in the next 8-12 months. First the guidelines will get released by RBI and then discussion will be invited from the people. After that will be the second draft.

Stock has run up swiftly from the level of Rs 50-52 as high as Rs 86-88. The profit booking is bound to come. Infact many of the late entrants those who have entered into between Rs 74 and Rs 88 are yet to exit. Maybe one should wait for the level of Rs 68-70. Once the stock takes some support on the technical front and the desperate hands moves out of the stock, one can think of taking a call.

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Q:  Do you think SREI Infrastructure stock is a missed opportunity or do you see more upside?

A: No, maybe again I will take some pause. The call which I was taking on the stock that it can move to about Rs 38-40 and it is now already closer to those levels. So, maybe the upside is quite low. I won’t be surprise to see the profit booking coming in to the extent of 12-15 percent, the way we have been witnessing in L&T Finance Holdings. The trend is that the stock which swiftly moves up, we see the profit booking coming in on the following days. So, I will wait. The reward is tilted more in favour of the risk.

Q: What is your view on this whole trading pattern that we are seeing? In such a choppy market are there any intraday trading ideas that you would advice with respect to either frontliners or midcaps? Or it’s better to stay on the sidelines, until you get more clarity with respect to the direction that this market will take next?

A: From trading point of view I will rather prefer to go with the cement stocks. In fact I will go with Ambuja and ACC both. In the midcap segments one can choose to go with stocks like Prism Cement, Heidelberg or may be Mangalam Cement at the lower level. Those are the ideas to go long in the cement sector. I will go short with the PSU banking basket in which I may include Union Bank, Oriental Bank of Commerce and Dena Bank. There one can really go short. One can even add the Bank of India even that looks quite weak in that space.

Q: Any stock specific approach that you would recommend to investors during the winter session or may be pre winter session?

A: I don’t think that one can really take a call on any stocks. If you really want to take (a call), probably it can be on the negative side on the FDI front. If the session is likely to remain stormy because of the voice against FDI in multi-brand retail, then Pantaloon and CESC can remain little subdued.

One can keep cautious to negative stance on the retail stocks. Otherwise, I won’t be taking any positive stance on any of the stocks related with parliament proceedings.

Also read: Sell Unitech, Ashok Leyland, UCO Bank: SP Tulsian