Rate-cut likely; infra soft till NIB is reality: Tulsian

Stock-analyst SP Tulsian of sptulsian.com explains to CNBC-TV18 that the consensual expectation that the RBI may cut the CRR by 25bps. Tulsian adds that the infrastructure-sector stocks would remain soft till the National Investment Board is made a reality after the power and environment ministers arrive at an agreement on the necessity of an investment body to expedite infrastructure projects.

Below is an edited transcript of the analysis on CNBC-TV18. Q: What do you make of the Shree Cement results and the management's commentary?
A: There is no point in comparing the results of this September quarter with the previous comparable September quarter because if you recall, in September 2011 the company posted a negative EBIT of about Rs 112 crore from power division and the benefits of a tax credit which allowed the company to post a positive EBITDA of Rs 210 crore in its cement segment. With a high level of depreciation of over Rs 160 crore, the company had a very low PAT of close to about Rs 38-40 crore.
If I take a sequential call from June to September, there has been a drop of about Rs 130 crore in the topline and an equivalent drop of about Rs 125-130 crore in the PAT as well. In the June quarter, the company had a prior year tax credit of Rs 60 crore. So, that means effectively there is sequential drop in the topline by about Rs 130 crore and a drop in the PAT by about Rs 65 crore.
These results are very much in line because it is common knowledge that cement companies will not be able to repeat the kind of performance posted for the June quarter. But there is a high probability that the performance of the June quarter might be seen in the December and March quarters. So, on a sequential basis, the performance seems to be in line with the expectations or identical to June quarter results. Q: You have been skeptical on October series and how the later half of the fiscal may shape up. Do you think this is just routine correction where a range of 5600-5800 is maintained that or do you think the downside may not be protected?
A: I have been taking a range of 5,450-5,850 with a rider that the correction will start from Monday as that has been my estimate for the last two weeks. But I am negative on the Bank Nifty. If you observed the range-bound move in the Bank Nifty in spite of Axis Bank having posted good results, it has not moved past 11,500 and almost corrected by about 170-180 points from its peak.
So, my negative stance continues to remain. I estimate that the lowest level during this series could be at about 10,600 with the expiry likely to be at about 10,800.
I think profit-booking has started in the rate-sensitives. And today, real estate stocks witnessed considerable corrections. Even the capital-goods stocks such as the Crompton Greaves, L&T, BHEL  and BGR Energy are looking quite weak. Due to disappointing results posted by banks, real estate, capital-goods companies and cement will keep the index weak till the expiry. So, I keep my view of 5,450-5,850 with more weakness on the Bank Nifty with a level of 10,600-10,800 intact. Q: How much of a trigger do you think the scheduled RBI meet on October 30 could be for the markets?
A: I don't think that it will really help to this series which expires on October 25. With the new series starting on October 26, probably the build-up may start from Monday, October 29.
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Probably from November 29, the market will start factoring-in the conclusions of the RBI meet, because currently, there seems to be a consensus that the RBI is likely to surely go ahead with a 25-bps cut in CRR. Opinion is however divided in respect to the cut in repo rate by 25 bps, which in my view, seems likely.
But a positive bias will start building up only on the back of banking stocks or on the rate-sensitives in the November series and by that time, there will be quite a good number of positive PSU-bank results. So, if the Bank Nifty makes all these sectors or the rate-sensitives correct by about 5 percent from current levels, it will make a good point of entry for traders to take a fresh positive call on those stocks. Q: How you would approach the infrastructure sector now? There are a lot of reports about the environment minister opposing the formation of a national investment board or granting such a body the right to sanction projects. In addition, the power ministry has also voiced objection. How do you approach the sector in taking all these events into consideration?
A: I think a national investment board is needed to accelerate the investment cycle and it is very unfortunate to see the power and environment ministers, both from the Congress, voicing opposition. But I think probably the Congress may be able to drive a consensus amongst its ministers. Once the NIB is pushed forward, I am sure it will be quite positive for all infrastructure stocks. But till then, due to the corrections in rate-sensitives will keep infrastructure stocks a bit soft for the next few weeks. Q: Regarding coal-block allocation, the IMG is expected to meet by October-end to allocate 33 blocks. How exactly would you read this development because the meet was expected to be held by October 20? Any stocks in particular that you would recommend?
A: It will be difficult to take a call on private companies as the recommendations by the IMG suggest that the government is favouring PSUs and state utilities. So till some clarity emerges on the allotment of coal-blocks to private companies, it is better to wait and watch. Q: Why is Essar Oil up by about 8 percent?
A: Honestly, the stock has been a difficult study. The stock rises on negative fundamental news and corrects when the fundamentals improve. This erratic behaviour might be because of the low float or an informed circle quite active in the stock. Frankly, the reason for this rise escapes me. Q: What do you make of ICSA India which is up 18 percent on very high volumes?
A: I will not be touching that stock. Despite the upward moves in the stock, I have no confidence my concerns continue to remain on the stock. I do not suggest investors to ride the momentum in the stock even for a day or two.