SP Tulsian of sptulsian, says that more weakness can be seen in ferrous metal sector in case of companies like Tata Steel, JSPL, JSW Steel, SAIL. Tulsian has a comfort level only on JSW Steel and it can be looked for buying at the lower level.
Below is the edited transcript of his interview to CNBC-TV18.Q: The big sell off has been in the metals pack, do you expect this kind of carnage to continue in names like JSPL and Tata Steel particularly which is down to Rs 350?A: More weakness can be seen in ferrous metal sector in case of companies like Tata Steel, JSPL, JSW Steel, SAIL practically all, which does not mean that non-ferrous metals are the exceptions, but a fall in
Hindustan Zinc and
Hindalco is not significant. At this stage, I am not including
Sesa Goa and
Sterlite in the space of non-ferrous metals because of the combinations of the other factors, but the situation continues to look bad for the non-ferrous metal space. The fear of regulatory actions against JSPL after yesterdays CBI action against five companies is likely to continue or will be a big hangover. I have a comfort level only on JSW Steel and it can be looked for buying at the lower level.
For the stock a support of Rs 650 looks good. The market is keeping a negative view on the JSW Ispat merger; however I don't have a negative stand on it. JSW Steel can be considered at a level of Rs 630-640 after taking into consideration the increase in the paid up equity by less than Rs 20 crore and reduction in book value by Rs 50 per share. But I will avoid stocks like Tata Steel, JSPL and SAIL where the divestment talks of the department of divestment with the bankers tomorrow are all on the agenda.
Q: Bharti is up almost 3%, you think it has seen its toughest at that Rs 240 level and now it is going to bounce back from there?A: I think lot of consolidation has happened in Bharti Airtel at Rs 245-250 level. The share has traded in the range of Rs 245-250 for a long time and at this level we have seen investors accumulating the stock at those levels with a view of one year because the comfort continues to remain on a longer level at that price. So I think that has happened and now the stock, which has started moving up can take the share price to move to Rs 270, where we will be again seeing the profit booking coming in from the traders.
Q: What did you make of the contours of the Jain Irrigation capital raising plan?A: I am happy with the move having initiated by the company. I think the infusion of Rs 1,200 crore into the company will definitely be improving the financial health. If you take a simple interest calculation that can on a quarterly basis reduce the interest liability by about Rs 40-45 crore, their biggest expenditure component is the interest liability of more than Rs 100 crore. So I am quite happy though the market has not responded.
A similar move happening in case of
Educomp some couple of months back and at that time the share used to rule at Rs 130-135, it remained lull for about couple of days but thereafter move to about Rs 175. Though a similar move cannot be expected but on a fundamental basis, I expect working of the company to improve from Q3 onwards.
Q: What is your best estimate of how much the quantum could be and when the timing of the diesel price could come in?A: One can expect the fuel price to increase on Monday or Tuesday. Increase of petrol price hike would be on the basis of cost determinant which may get increased between Rs 3-5. However, I expect diesel price to increase by a minimum of Rs 4 and not beyond Rs 5.
Q: What is the main reason for the down tick that we are seeing in BHEL? Is it just in general the despondency over the earnings, etc or is there something else?A: According to the data some fresh shorts have been created in the stock and open interest position has been creat6ed but on a fundamental basis I don't see any reason for the stock to fall.
Q: What is the problem with these NBFCs, REC, PFC even the private sector IDFC, they seem to be losing favour with investors?A: The main concern is mainly in respect to the financing to the infrastructure and power because we have the negative perception continuing on both the sectors. Since they have the focus on that and if you see their growth coming in.
I don't think that the worry is more in respect to the assets having financed by them, but it is more in respect to the new projects not coming in, in the near future because I don't think that specially in case of infrastructure there is any courage amongst the promoters to really take up the new projects, be it road, airports or other infrastructure development.
I don't expect anything immediate to happen in near future in case of power generation. The kind of growth anticipated especially for all these three seems to be a bug worry to the market.
Q: We have seen this couple of weeks back as well, but you don’t see any major impact to ITC do you?A: I don't think so. May be the stock can correct by Rs 8-10, but overall trajectory may be because of the FMCG status or the amount having seen parked in these stocks, whether you talk of
HUL, ITC, I think the positive bias will continue.
Q: There is some talk of cement prices declining by about 3-5% in the month of August. What is your view on how one should approach the cement sector after it’s seen such a good run up in the last quarter?A: I am not having a negative view because this kind of price softening always happens and we have seen the monsoon how it has really picked up in the central part of the country like Rajasthan, Gujarat, Maharashtra, Madhya Pradesh and even the Northern part of Delhi.
So, I think this is the effect of that probably the consumption has because of this has really softened but things will pick up so maybe to continue to keep the pace of the dispatches we have seen the prices softening. But again the things will start improving from the month of October when the monsoons will come to an end.
So, I am keeping a positive stance and in fact the kind of correction which we have seen in the three major like Ambuja,
ACC and the
UltraTech Cement I think all three makes an entry point from the current levels.
