Here's how you should paly GAIL, Tata Motors post results

In an interview to CNBC-TV18, SP Tulsian, sptulsian.com adviced not to go with the quarterly numbers of stocks like ONGC, Oil India and GAIL,the oil marketing and upstream companies since it is a futile exercise and the whims of the oil and natural gas ministry are unknown.

He has also suggested caution on stocks like Tata Motors - DVR as the stock corrected to Rs 218-220 some three months back. "On that fear and considering the global situation I am expecting the share to fall to Rs 235-240," he added.

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

Q: ONGC’s numbers come in today. It is impossible to predict what subsidy they will pay out. Are you expecting anything special from the numbers?

A: No, nothing special. Sometimes, taking a call on a quarterly basis for ONGC, Oil India and GAIL, the oil marketing and upstream companies is a futile exercise. Because you do not know the whims of the ministry that how much they will direct.

If you see in Q4, always these upstream companies have a huge burden of subsidy which is supporting the three oil marketing companies. Honestly, I am not taking a serious call on their quarterly numbers and again barring the uncertainty of the subsidy, I do not think anything. That will be flat as usual.

Q: You have spoken about Tata Motors DVR in the past. How did you read the results? Where do you think the stock is headed?

A: I will be taking the results with little caution. If you see, 85 percent plus is coming in from the JLR. There has been disappointment on the domestic front. You never know when suddenly you may have disappointment from the JLR or maybe their global operations. Once that starts happening and there is a dip in their sales or their margins that can further bring down.

I am keeping a cautious stance on the share and will not be surprised, recalling three months back when the stock corrected to Rs 218-220. On that fear and considering the global situation I am expecting the share to fall to Rs 235-240.

Sometimes we see the gap between the share and DVR getting shrunk, but that can widen. So maybe on a relative basis the losses could be more on holding the long positions in DVR than remaining on the shares. But overall my cautious stance remains on both with a price target of Rs 235-240 for Tata Motors.

Q: You track Bombay Dyeing as well. Any view on how that would react?

A: As Udayan has analyzed, there has been no contribution from the real estate segment. That has been the situation in Q1 as well as Q2. If you see their other segments the losses have started lowering on those accounts and that is positive. The company has the total debt of close to Rs 800 crore and if they bring it down to Rs 200-300 crore, which they can easily do by monetizing some part. Because when they sell things it is en bloc where huge realizations are made by them.

I do not think they need much infusion in the real estate sector. So yes, it will be very interesting to see the second half of the company because they have good quantity of real estates completed already, at Wadala, Lower Parel. So, I am quite positive and you will suddenly see the en bloc profits coming in from the realty sector. Any dip in the share price should be used as an entry point.

Q: Are there any expectations from RCom today, after looking at Bharti’s number yesterday?

A: No, again flat numbers. Maybe that EBITDA of 31 percent or kind, but a very dull and boring bottom-line of Rs 150 crore. So nothing can really be expected, it will not be exciting. Also, it will not be very poor.

Q: How do you see HUL and ITC do in a weak global environment?

A: When the results came in, I was expecting the stock to correct at Rs 535. If you really see the price behaviour for the last three days in spite of other sensitive stocks moving up, this has held on Rs 530-535. So now is the suitable time for the people to take the shift into the defensive. If you really take a call after pharma, I do not think ITC is really seen to be defensive.

So, these two stocks HUL and ITC come to mind and amongst both of them definitely, HUL will be a choice. Today, I will not be surprised to see HUL remaining firm or move by 3-4 percent in the next couple of days. Because in such a situation it is best to take a shift into HUL, when it is ruling at Rs 530-535.

Q: In this series, what downside do you see in the Nifty?

A: I am revisiting my old call on the Nifty at 5450-5850 with a very weak stance on the Bank Nifty. I am expecting the Bank Nifty to remain quite weak. If you see the built-up taking place in the Bank Nifty in last couple of days, market is overbought.

If you talk to any retail guys or maybe small traders they are long in all kind of PSU banking stocks and Bank Nifty. That will have a big beating on the Bank Nifty which will have its effect on the Nifty as well. So I am expecting Nifty to correct maybe around 5550-5600 in next 2-3 days or so.