Find out SP Tulsian's long and short bets

SP Tulsian of sptulsian.com calls short on vulnerable stocks such as Jaiprakash Associates (JP Associates), Bharti Airtel and Tata Steel. He told CNBC-TV18 that the depreciating rupee is leading to their foreign debts surging.

He advises investors to keep a watch on clearances of divestment stake in Coal India and the offer for sale (OFS) by government companies for meeting the public holding norms of the Securities and Exchange Board of India (SEBI) norms. This is apart from the inflation and index of industrial production (IIP) data expected this week. He placed his long calls on Madras Cements and Mahindra Satyam. On short calls, he placed his bets on United Phosphorous and JP Associates. Commenting on Polaris Technologies' bull run, he says that such stake sales do not offer hefty dividend to investors. He advised investors not to enter this stock at the current price as its fair value is capped on the upper side. Also read: Deal fever hits midcap IT; investors eye MphasiS, Polaris Below is the edited transcript of his interview to CNBC-TV18. Q: A trend I noticed on Friday; due the depreciating rupee, a lot of companies having high dollar debt started to sink. JP Associates and Bharti were two of them. Next week, would it be a good idea to go short on these stocks? Which one would you pick up? A: Due to rupee weakness, companies in the past too have taken a lot of hit because of debt and the interest payment. Companies like JP Associates have a debt of Rs 55,000-56,000 crore on consolidated basis. Bharti Airtel and Tata Steel also have a huge chunk of foreign debt. Definitely, these stocks are looking quite vulnerable. Lack of buying interest across the board in the market as the focus is only on few frontline stocks, it is better to go short on them. Q: Next week is relatively light in terms of events. We do have IIP and inflation data. But what, according to you, are the events to watch out for? A: Apart from this IIP and inflation; watch should be kept on two events from the government side. One is the likely clearances of 10 percent divestment in Coal India. The prime minister’s office is likely to give a go ahead after the finance minister submitted the clarification. This may be taken up by the Cabinet Committee on Economic Affairs (CCEA). Two, the offer for sale (OFS) will be initiated by the government companies. There are 11-12 companies still having the holding of above 90 percent which has to be brought down by August 3. The government has about 50 days time. Divestment or OFS in MMTC, National Fertilizers (NFL), HMT could be kept a watch on. _PAGEBREAK_ Q: For next week, what would your recommendations be? A: Two long and two short calls. Go long on Mahindra Satyam and Madras Cement. On Mahindra Satyam; the rupee is weakening which is quite positive for the IT companies. Post-correction, Mahindra Satyam is now ruling at a lower end. It can probably give a rise of about 6-7 percent next week. With Madras Cement, we have been seeing the buying from the informed circle for the last three-four days. This is gradually taking the share price up. That has potential gain of about 5 percent next week. Two short calls. On JP Associates, a little weakness was seen in all the stocks of JP Group. The share is likely to remain weak for quite some time. Go short on United Phosphorous. After holding the share quite firm post its Q4 number, which has been very good, there is liquidation of long positions and profit booking by the institutional investors. If this trend continues, the stock can further correct by about 5 percent in the next week. Q: Finally; your call from on one of the biggest midcap gainer last week; Polaris. It is up about 15 percent. Any thoughts on when this deal (stake sale) will fructify? As a minority shareholder, what would you do with Polaris? A: The deal is certain. I think the deal should get consummated in the next couple of weeks. It is not wise to enter into the stock now because Rs 140 is its fair value capped on the upper side. In the past, whenever these things happened in Piramal Enterprise or Stride Arcolab, where the company got huge money by hiving off their 70-80 percent business, they haven’t rewarded the shareholders in the form of distribution of hefty dividend. Similar case may happen here too. The company already has Rs 250-300 crore as cash. It is a debt free company and if they are able to take about Rs 1,500-1,800 crore, net of taxes. From this, one can not really reward the shareholders. At Rs 140, the market cap is Rs 1,500 crore against which the cash and cash equivalent is about Rs 2,000 crore. So that price seems to be the fair price. Those who are holding the stock, I will advice them to exit now.