Auto ancillary, cement and oil look promising: SP Tulsian

A: Two-three points. Firstly I don't think that one should really keep any F&O positions open because it is very god sent opportunity that things have happened on Thursday where the forced liquidations of positions will happen. Those who will be rolling it over even if they make money they will be carrying a lot of stress in their mind because the volatility which we are going to see for next two or three days, number one.

Number two, definitely time to buy the stocks. I won't differentiate between the frontline and the midcap. In fact midcap can give you more opportunities. In fact if you see today also I am just trying to give some of the examples like Century Textiles having run 42 percent in this series. Still it is just down by a couple of percent only. So, I am not trying to say that buy Century Textile. What my point is that the stocks which you have all identified largely on the expectations of good numbers which we are going to see on the Q2 where you have very good certainty that those numbers are going to be seen. They take a plunge in those stocks.

Maybe if you go by the sector wise two sectors look really very promising. One is auto ancillary and second is cement. I will not plunge into any other sectors and third could be oil marketing companies (OMCs) in spite of crude having bounced back because I don't think that now OMCs will have any kind of losses or negative perception building up because of the crude price volatility or crude price movement.

Lastly, as I said you need to be investor, so nobody can advice you whether the market has bottomed out, situation will not worsen. We wish that god forbid that things doesn't go in a critical way. But this has been a very courageous steps having taken by the government and I think whatever feedbacks and whatever talks we have everyone is in support. But you never know, the war situation is not going to give you the stability to the market. So, in that situation look to deploy 25 percent of the cash whatever you have and again in the stocks in which you have made good amount of profits to the extent of 10 percent or more because the kind of run up which we have seen in this last couple of months in the midcap and small cap as I said that Century Textile is just an example of 42 percent, no harm. There is no necessity to remain invested. 

Generally investors what is doing is that stocks those who are giving them good profits they don't book profits, they don't book profits, they just retain them and then profit keeps evaporating. So, book profits as well in the stocks where you are getting a gain of about 10 percent plus which you have bought in this last couple of months. So, this should be the strategy. Definitely cash should be retained and 25 to 33 percent now in the current situation and look for the stability to return back in the next couple of days. 

Anuj: You had said yesterday that you won’t be surprised to see the stock trading below issue price today, IPO was an avoid for you, at sub Rs 300 is it a buy for you now?

A: Yesterday in fact I have said that the wisdom should have prevailed upon the ICICI to discover the book at a lower level, maybe at Rs 310-315 they had a price band of Rs 300-334 if you believe me if they would have discovered the price at Rs 310-315 knowing fully well that how does the IPO has been sailed through, if IPO is not subscribing for 2 full day and three-fourth day and then you see it happening by maybe 8-10 times largely thanks to HNIs and the kind of thing I don’t want to discuss in those things, then this would have been facing for the ICICI, but sometime as an analyst you feel that greed prevails even with the upper people also who talks of the investor protection, who talk of the fair valuations and who are supposed to care of things, so if the price would have been discovered at Rs 310, then there would have been face saving, probably you would have seen the stock ruling at Rs 310-315 number one.

Number two on the first day which I repeatedly said in all issues you are going to see all the grey market trades and all the leverage applications, which were made in HNI category has to get squared off today on the first day itself, you don’t have any room to roll it over on the next day, so all those trades are getting liquidated, the bottom in my opinion will get form whether that happens at Rs 295 or Rs 300 and coming on this EV to embedded value, I have said at the time of issue analysis also that these are just an eyewash, you just can’t take, you want to give a EV to embedded value that can’t be the sole basis of valuation.

Take the weightage, take the price to book, take the PE multiple, you are issuing at a PE multiple of 30. Your earnings was constant for last 4 years. You have more of the ULIP forming of your portfolio to the extent of 80 percent plus. Your price to book is, give a weightage to each one of them just EV to embedded value cannot be the basis.

Take the case of now the share listing at Rs 300 that means it is ruling at EV to embedded value of 3.1, where the valuation, where are those experts gone who were advocating for a EV to embedded value of 3.5-4 saying that HDFC is ruling at a EV to embedded value of 4, so I don’t subscribe these arguments and all that and this was the largest issue.

The wisdom should have prevailed upon the issuer. They themselves are the capital market protector they should understand that the issue is really quite stretch. We may talk of future potential, but what has been the earning for last 5 years. It has been constant, no growth has been seen and believe the things are not going to see the compound annual growth rate (CAGR) of 18-20 percent going over for the next 3-5 years. So, rightly the market has penalised, but I think that whatever has to happen has happened. I don’t think that further weakness is going to be seen, as I have said yesterday also that I see the price would have been fair at Rs 310-315 which I have stated yesterday also.

Anuj: Jet Airways is down 13 percent today, it is a combination of course crude surging 5 percent and it being in high beta space, but would this be one stock that you would want to buy if it corrects more?

A: Two reasons which I won’t take a call right now, one is this rising crude and second is the Q2 numbers. As I said just now that I have been taking a call on the expected good numbers to be seen from the companies and definitely aviation doesn’t fall aviation doesn’t fall in that space and I have been for a while post this Q1 numbers having seen from SpiceJet I have changed my view from Jet to SpiceJet as number one in the pecking order, so maybe I look to buy SpiceJet, but if you are compulsive F&O trader and you want to go for it then that is a different case, but as such I am not advising any investors to take F&O positions whether in the promising stocks or otherwise. So, I won’t be taking a buying call right now on Jet Airways in spite of the correction.

Latha: The gas price will be announce tomorrow or day after and that is not going to be much disturbed by the rise in crude price. Gujarat State Petronet Limited (GSPL) is in the green. Are there buying opportunities in that space?

A: Maybe the gas distribution companies, like Mahanagar Gas Limited (MGL) or maybe Indraprastha Gas Limited (IGL) or to some extent Gas Authority of India Limited (GAIL) all three can be looked into because they three are seen to be beneficiaries of the falling gas prices and that will see their margin expansion as well as volume growth. So, I won't hesitate in taking - but again as an investor but as F&O trader.