Mkt weak on Bank Nifty; Bet on Maruti, Petronet: Tulsian

Stock-analyst SP Tulsian of sptulsian.com explains to CNBC-TV18 that the market will remain due to the Bank Nifty and advises investors to bet on Maruti and Petronet LNG.

Below is an edited transcript of the analysis on CNBC-TV18. Q: What have you made of today's trading action? The market is down close to about 1 percent on the Nifty and the Sensex. Do you get the sense that the markets are looking weak? What do you attribute today’s weakness to?
A: I maintain my outlook that the market is weak based on the Bank Nifty which started with 11,560 on the first day of the series. After a high of 11,800 and low of 11,300 it has been stable at 11,500 or 11,550.
Now I think the Bank Nifty is going through a breakdown and I expect a fall by 300-400 points in next three days because none of the PSU banks and private- sector bank-stocks, except for Axis Bank, I don’t have any conviction on the upper side.
Sometimes I feel that probably investors holding their positions are trying to hold at those levels, especially in case of SBI, Canara Bank, PNB, Bank of Baroda and ICICI Bank. With three working days left till expiry and the market to remain closed on Wednesday, I expect the Bank Nifty to fall to about 11,100 and that will have its effect on Nifty as well. If the Bank Nifty corrects by those many points, we can see the Nifty also falling to about 5,500 or 5,550. Q: What is your view on Exide after the company posted results? The inconsistency in the margin profile continues. How do you think that will affect investor-confidence going ahead?
A: I take this as a big disappointment. The margin of over-15 percent in Q1 and about 12.3 percent currently means that the company has an average margin in the first half of the year was sub-14 percent. According to the management's guidance, a margin of 17 percent was indicated. I have my doubts that the company will be able to ramp up this margin to 20 percent in the second-half of the year in spite of the increase in prices having affected the stock by 5 percent.
In fact, that is the reason Exide has been disappointing the market for the last one year. If you see the stock's 52-week high and current levels, the stock's range of Rs 150-170 has fallen to as low as Rs 130-150. Though in the last week, the stock has been moving as high as Rs 163-164, I feel that the stock will fall back to the level or range of about Rs 140-145 and remain subdued or range-bound for a very long time, for 30-45 days.
So I do not take a positive stance on the stock beyond Rs 154-155 with a low of Rs 140. Q: How do you read Petronet LNG's results? Do you see an upside or earnings upgrade on the back of these results which look good on the operational front?
A: Yes, the company has performed well. The growth in volume has increased by 5-6 percent. The PAT has posted a major increase largely on forex gains. But the PAT of about Rs 315 crore has allowed, for the first time, the company into the trajectory of posting a bottom-line of Rs 300 crore. My worry is that the market should not take this as an expectation.
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Overall, the company's performance has been very good and is likely to continue because of their strong plans. The company is now eyeing to market LNG to gas-based power producers which have a demand of about 4,000 MW but remain idle for want of gas.So I remain positive on the stock because of the good results. Q: In terms of ITC's performance, how much more of an upside can you forecast both on the stock as well as on the earnings after what has been announced in this quarter?
A: If you really take a call on ITC's earnings, it is a disappointment. But one cannot really dispute the consistency in the growth and performance of ITC. I have been my cautious on both HUL and ITC.
The kind of run-up seen in the stock may be because there is a lack of avenue available in the market for investors to make shift into. Once those avenues start opening up, there may be some profit-booking which could make stocks correct.
Though I do not estimate much of a downside, but the moment there is conviction in other sectors either because of policy initiatives or better performance, then profit- booking may return to the stock. So, may be a level of Rs 280 looks to me as a good entry point. But otherwise, I will remain away from the stock. Q: Ultratech Cement, JK Lakshmi Cement and later in the week, Prism Cement are scheduled to announce results. Given the kind of robust performance from the cement sector or at least from some of the companies, what are your expectations?
A: It will be interesting to keep an eye on Ultratech Cement in the light of results posted by Ambuja and ACC. ACC has slightly disappointed with a dip of about 80 bps to 1 percent in its margins. So it will be interesting to see what happens in case of Ultratech Cement. But coming to the two smaller companies, JK Lakshmi and Prism, I think the results will be on a sequential basis and will not be as disappointing as seen in case of the larger companies.
Overall, profit-booking has begun to return. Until, Ultratech’s results are similar to the performance posted by Ambuja Cement, then prices will sustain otherwise I have my doubts that profit booking will come into Ultratech. Q: Next week, all the auto companies will announce results starting with Bajaj Auto tomorrow. What is your best pick in that lot?
A: I will keep my eyes on two stocks - Bajaj Auto and Maruti. I don't think that the market is going to get any cheer from the results of auto companies such as Hero Moto, TVS Motor or Ashok Leyland. I am not hopeful even on the Tata Motors. Q: Did you have a look at eClerx results and what would you do with the stock?
A: I have not gone through the results, but I have not been too bullish on the stock as I have not been closely tracking it.