Here's how you should play GMR, Cinemax now

In an interview to CNBC-TV18, SP Tulsian of sptulsian.com shared outlook on GMR and Cinemax. He does not expect GMR stock to correct below Rs 16.

Tulsian is positive on Cinemax. He believes that the promoters of Cinemax have been able to extract very good valuations. "The upside from hereon may make the share move to Rs 196 to Rs 198. Since, the deal has happened at Rs 203, PVR can slip further by 3-5 percent." he added.

Below is the edited transcript of his interview to CNBC-TV18

Q: One stock which has been under pressure is GMR, has lost 3 percent today. Do you expect more weakness?

A: No. I don’t think that this stock can really fall below Rs 16. According to the kind of corrections which we have seen, Male airport has been a priced asset for the company. That is not because most of negatives have been factored in the price, so maybe a fall of Re 1 to Rs 1.50 from hereon. We may see the renewed buying coming back at those levels. That has generally seen the strong support for the stocks at Rs 16-Rs 16.50

Q: There is going to be voting with regards to the discussion in the Rajya Sabha and the Lok Sabha. How have you read the news?

A: This is positive news to break the logjam. Bharatiya Janata Party (BJP) has put a conditions that they wont allow the house to function unless until they see voting happening on FDI. Congress has done good homework. The moment see clearance from DMK that they will be supporting the government on this front, they have promptly agreed to go for voting in the Lok Sabha.

Now, there will be voting in both the upper and the lower house. This confirms Congress' win in the Lok Sabha, it maybe partly abstained by other allies. So, that will be a big win or a big positive for the government. If I go by the statement given by Sushma Swaraj that she or the BJP will allow the house to function normally then the next hopes will be on how many bills get passed.

The house is only functional till December 20 and we will be having these episodes getting over by December 5. So, the business will start as usual from December 10-20. If some bills get passed, about 15-20 of them then the rest will just a formality to quickly passed. If that starts happening, then I see positive. If any problem comes in between then it will be a cautious stance again. As of now it is positive, especially for retail stocks.

Also read: SP to vote against FDI in Rajya Sabha

Q: A word on Cinemax at a price of Rs 203. How do you read the deal and what it means now?

A: The promoters of Cinemax have been able to extract very good valuations. This is negative for PVR because they have paid. I don’t know what the desperation on their part was. I have been taking a call that the deal should happen anywhere between Rs 180 to Rs 190.

Some element of the deal has been valued 10 percent more so maybe positive for Cinemax. There will be open offer and under the open offer all the shares will get accepted. The upside from hereon may make the share move to Rs 196 to Rs 198. Since, the deal has happened at Rs 203, PVR can slip further from hereon by 3 to 5 percent.

Also read: Cinemax promoters sell stake to PVR for Rs 395 crore

Q: Any reason why you think PVR could now be up about 13 percent?

A: No idea because I won’t be keeping positive stance. If I presume that entire amount will be raised by the company via debts and add the open offer also it will be, the interest burden of about Rs 60-65 crore. If one takes a call on Cinemax, it will eventually get merger with PVR.

A 69 percent from promoter and 26 percent under open offer will give them 95 percent. Under this open offer, Sebi will not allow to go for de-listing. They have to give an undertaking that in the next six months they will dilute their stake to 75 percent. This won’t be comfortable. So, I am not convinced with this kind of up move and rally in PVR.

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Q: How would you approach this momentum burst right now?

A: I will be bit cautious because on the last day of expiry one sees index management element also coming in. So, one has to really watch for two or three days, tomorrow being the first day of new series. If momentum continues till Tuesday, I am keeping my cautious stance in fact I am not looking for the level of 6000 also.

It may touch 6000 but it may not sustain. So, I will keep my cautious stance on the market for December series. Today’s rally could be more seen as an exercise towards the part of index management. There is no reason for the Nifty to move beyond or more than 160-170 points in couple of days ahead of the expiry.

Also read: Sentiments improve; Nifty may breakout of range: Udayan

Q: What do you think is driving the price volume equation today? Do you think there is a bit of short squeeze in certain counters or does it look like genuinely delivery based buying which has lifted prices over the last couple of days?

A: It does not look like that only the short squeeze is happening. I don’t know what is advance decline number but the focus has definitely shifted on frontline. This was not seen for the last couple of weeks. I am wondering that the fresh buying is seen in many of the front line stocks, like HFDC and UltraTech cements. These are the few stocks which I have been just watching and getting some indication.

So, now if you see the advance decline 850 to 600 – considering such a blast and big rally. This should have been with the ratio of 3:1. So, definitely people are shifting or coming out from the midcap stocks on which they have been making good profits. They are moving back to the frontline. It is a combination of both but ultimately the delivery data in the evening will give us the more analysis. I am not only going by the short squeeze though I am saying that this could be a rally as part of index management. However, this is coupled with the delivery based buying in the front liners.

Q: What would you do in the real estate space now where there seems to be a lot of interest again?

A: Still keeping my positive stance on the companies those who have a strong presence in the cities like Mumbai or Bangalore. Firstly, the execution capability will really start happening. Second point will be that how quickly the companies can start reducing their debt. The case in point for Mumbai based company will be HDIL. They have said that in the second half they will be quickly selling or maybe the process of TDR sale will accelerate.

 That can make them reduce the debt by Rs 1000 crore. So, these are the individual call which we need to take on the respective companies. I am keeping my positive stance on the Mumbai real estate market because the kind of firmness which we have been seeing here in that category there are many stocks available like HDIL, Peninsula Land, DB Realty or maybe Orbit Corp.

Q: Do you think United Spirits has exceeded itself? Are you taking profits here?

A: Definitely. I was taking a call of Rs 1800. Maybe the price revision can happen for the open offer also at Rs 1440. However, any level beyond Rs 2,000 advices profit booking for the existing investor.

Also read: Angel Broking neutral on United Spirits

Q: What are your expectations of the kind of base that we might set from hereon after the breakout of the last couple of days as we go into the December series?

A: I think maybe 5450 will continue to be the base for the market. That has been the base taken for the November series also. Since, the weakness has not been beyond 5550 for the series, so 5450 should continue. But I will keep my cautious stance for the first whole week. Maybe tomorrow continues to remain the positive day. Generally, whenever we have the positive close we see first day of the new series also going into the bullish mode. The caution will start coming in from Monday onwards.