IT, banks may hold mkt; Bet on SpiceJet, Bharti: Tulsian

Stock analyst SP Tulsian of sptulsian.com explains to CNBC-TV18 that his outlook on the bourses remains negative due apprehension on the IT sector's second quarter results and lack of any further upside in the Bank Nifty. SpiceJet and Bharti lead the pack as the most attractive propositions for FDI.

Below is an edited transcript of the analysis on CNBC-TV18. Q: What have you made of today's market move?
A: I don't think the market has moved that this has happened because of the freak trade or technical glitch at the NSE. Over the last 4-5 days, I have maintained a view that isn’t much upside for the Bank Nifty on second-quarter results and concerns of asset quality will continue to remain on public sector banks.  Most of the private-sector banks have topped out.  IT stocks have begun to correct due to firmness in the rupee and apprehensions on second-quarter results especially from Infosys.
So the Nifty will be under check thanks to the IT and banking sectors as both have a combined weightage of 35-38 percent. And because of this, my outlook on the indices is cautious-to-negative. Q: So, what happens to Emkay now?
A: It is difficult to ascertain what kind of losses the brokerage has incurred. It depends on the quantum of the loss which will be known only in the third quarter and because this has happened in October, it will not be reflected in the second quarter. So, definitely I continue to be negative on the stock. Q: There has been a spate of flash crashes in the past. Earlier this year, the Nifty fell six percent but not to the extent that we saw today. What should be done in order to minimise these losses? Do you think some sort of penalty should be put into place for brokers to tighten the risk control?
A: This needs to be understood. I don't think that this is intentional. The NSE has said that 59 trades that happened were erroneous. And erroneous or the mistakes can only happen in respect to the price. I don't think that there could be any mistake in respect to the quantity.
So yes, the broker has to be careful while executing the trades though there is already a risk control mechanism and surveillance system by the exchanges. I don't think that mechanism or the rules need to be further tightened. Q: What have you made of Essel Group selling a seven-percent stake in IVRCL?
A: This is a very strange case. While I'm at a loss to explain the logic to acquire a 12.27-percent stake at an average price of Rs 55, the exit at an average price of Rs 50 is even more puzzling.
The announcements made by IVRCL of not participating in future projects and monetising assets to reduce the debts, definitely indicates that some sort of settlement must have been reached between Essel Group and the promoters. Q: Now that FDI in aviation, retail and insurance has been announced, there is a strong conviction on the street that deals to bring in overseas funds will fructify at least in this fiscal. What is your view? And which stocks could be the incremental beneficiaries?
A: Sometimes I feel that the street is too impulsive. It expects foreign investors coming with dollars on the platter to make investments. Firstly, the negotiations have to start. Then the intention of the promoters has to be gauged by the investment bankers, after which due diligence will be carried out.
In Indian aviation, SpiceJet is the only attractive proposition. On the contrary, I am a bit apprehensive on Jet Airways which has a debt of Rs 14,000-15,000 crore.  In multi-brand retail, the talks have already begun and the Bharti Group has been very bullish.
I expect some kind of memorandum of intent being executed in this financial year in multi-brand retail and aviation. Q: What do you expect from the Sebi board meeting?
A: I think a lot will be taken up by Sebi in respect to debt instruments, which may not interest the public per se. The thorn in the agenda is the dilution of 25 percent equity to the public by June 2013. Q: What is your view on Kingfisher Airlines which has lost 20% this week? How would you approach the stock now?
A: If you view KFA in isolation, the situation seems precarious. But once Vijay Mallya seals the stake-sale with Diageo, then he will have funds of Rs 4000 crore which will be utilised to pay off the liabilities of the employees and then the banks. Once these problems are resolved, he will definitely go to the banks with a concrete plan. Q: What is the next set reforms you expect?
A: It is difficult to say. I am not expecting much to come from the government from hereon. Q: What do you make of the block deal between HDFC and Carlyle?
A: Whenever these kind of block deals are inked, it that actually allows entry to long-term investors. So, I think now this should be used as an opportunity to buy the stock maybe with a 6-to-12-month view.