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Last Updated : Jul 14, 2016 06:44 PM IST | Source: CNBC-TV18

Find out why Tulsian is bullish on logistics stocks

In an interview with CNBC-TV18, market expert SP Tulsian gave his views on public sector undertaking (PSU) bank stocks and told why he is bullish on logistic stocks.

In an interview with CNBC-TV18, market expert SP Tulsian gave his views on public sector undertaking (PSU) bank stocks and told why he is bullish on logistic stocks.

Below is the verbatim transcript of SP Tulsian's interview to Anuj Singhal and Sonia Shenoy on CNBC-TV18.

Anuj: My mind keeps going back to the conversation that we had two weeks back when you said this month could be for PSU banks considering that none of them will declare numbers and we have seen such a huge rally in some of these midcap PSU banks, but is this exuberance now and would you advise profit booking.

A: You need to bifurcate that in two parts fundamental and technical and if you really ask me on a fundamental it can be called exuberance because the kind of run up which we have seen in these prices are closer to about 30 percent and unless and until you need to get the asset quality picture or maybe the return on assets, operating profit and so many other things from all these banks it is very difficult to say, because in absence of the results before you of Q1 it is difficult for you to take a call so maybe right now if you are seeing the 30 percent gain purely as a fundamental analyst I will say that this is an exuberance, but on a technical basis if you really see the stocks were all heavily oversold and under owned and in fact the kind of momentum which we have seen and on which I have said on May 27 start of May series that once the stocks comes into the grip you don’t find them going out so easily and that coincides with the expiry of the series, so again same view that till July 28, I think one or two banks have only given the dates Canara Bank and I don’t remember the other bank’s name as their Q1 numbers and again people have started interpreting that as a good number because they feel that if the results are coming before expiry the results are bound to be good, otherwise they would have delayed the results so you start twisting or interpreting the data as the market moves, so yes the positive movement is likely to continue and on fundamental maybe but exuberance, but on a technical I still find more upside for the PSU banks which may last till expiry of the series, but yes caution will definitely be desired for August series on all the PSU banks.

Anuj: You have been bullish on logistics stocks, are you getting a sense that this will be the session in which this bill will be passed and can investors stay invested in all this logistics names.

A: There has been kind of dilly dallying happening on the goods and service tax (GST) front, but about a week back or since then I have been taking a 99 percent confirm call because if you see this will going to spoil the image of congress also if they don’t extend the consent for passing the GST constitutional bill amendment in this session of Rajya Sabha, but let’s understand this parliament session will session will start on July 18 and will last up to August 12, this is again my calculation expect the bills to get passed on August 11 or August 12.

I won’t be surprised to see that August 12 session lasting till maybe 8 o’clock or 9 o’clock because this is typical human mentality of getting the things done at the last moment and that is likely to happen. So between the lip and cup there is a gap of at least about a month or so, we are today July 14.

I am expecting the GST bill to get passed on August 11 or August 12 which looks certain, so again in the interim period you are going to see some hulla bulla and again party getting annoyed or displeasure and all sort of things, but I am 99 percent sure that GST bill will get passed in this session and accordingly it is only the entry level which is relevant, but otherwise there is no confusion of taking a positive call on all the logistic stocks, because if you see amongst the logistic space there are many ideas available, but one point which I have been harping again and again is that let’s not confine only to the logistic stocks, because if you see this GST getting implemented from April 1, 2017 that will straightway get 150 basis point added to the gross domestic product (GDP) of the country and people will probably be start taking a double digit GDP call also for FY18 of India and that will be seen very positive.

So overall, very good, very positive days are coming in with constitutional bill getting passed in this session will change the total outlook and then the upgradation of rerating, increase in the corporate earnings, increase in the GDP all sort of things will start. So yes focus on logistic stocks, but keep your areas open on the entire gamut of the quality stocks going forward.

Sonia: I wanted your view on ICICI Bank. It is up 12 percent this month already and now it is trading at a book value of almost 1.6 times FY17, price-to-book that is. At this level, what does the risk reward look like?

A: I do not think that you have portion of reward going forward in the stock, because if you really see Sonia, the one development which has really disappointed me on the taking of fundamental call on ICICI Bank, where I have read that the ICICI Bank have sold Rs 1,600 crore exposure to Essar Group to the asset reconstruction company (ARC) that is Edelweiss ARC recently, may be in this last one week or so.

And if you really see these kind of things coming in, Essar is not broke or a bankrupt or a defaulter kind of group and if they are not able to recover that and they quietly and coolly sell that as a stressed asset to ARC, sometimes I really wonder the wisdom of the bank. Let me be very blunt.

On one hand, you see Essar Group where they are selling their stake to foreign partner of Essar Oil and all that Rs 30,000-35,000 crore.

So, when we take a call on the asset quality of the banks, we sometimes ask a question that do you not think that this bank, those who are running the banks, they themselves are responsible for creating this kind of mess. Why we have not seen this kind of mess having created in IndusInd Bank or maybe in YES Bank or maybe in Kotak Mahindra Bank, Rs 1,600 crore is not a small amount. So it is very scary to put these banks at par with the quality private sector bank or you need to put them at par with the PSU bank.

So, yes, the momentum has seen it moving way beyond the, purely on a fundamental basis also. So, I will not be taking a investment call.

Again, maybe this momentum can continue till expiry, but I do not think that Q1 numbers are going to be any kind of respite being given to the market and they will be taking a positive call.

So, I am quite apprehensive on the Q1 numbers, the development which I have stated are not giving comfort, so I will not be taking an investment call. Technical, yes you can hold till expiry and try for Rs 8-10 further gain from here.

Anuj: You were bullish on Yes Bank all through last year, but at Rs 1,172 you will recommend booking profit.

A: That’s right, in fact, if you remember when the apprehensions and lot of uncertainty and the negative bias was building, I had picked up two stocks at that point of time Yes Bank and Kotak Mahindra Bank and maybe Yes Bank has given a very good return in this last 6 or 7 months, but I think now you look for the other ideas.

In fact, Karnataka Bank was also recommended but 2 or 3 banks come to my mind. In case of Yes Bank it seems to be picking out to its levels, I can’t in fact talk of the momentum going forward or maybe once I see the Q1 numbers then probably the view can get changed, but as of now I think that stock is fully priced, but you need to look for the other ideas like Federal Bank or J&K or maybe Karnataka Bank.

Though again the Karnataka recommended at Rs 110 2-3 months back has also crossed Rs 150, but still I keep my positive bias on the stock because if you really see price to book multiple of maybe 0.7-0.75 for the Karnataka Bank and maybe on the PE ratio also it is ruling at a level of maybe about 6-6.5 times, so still few of these other banks are now looking good, but Yes Bank looks fully priced now.

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First Published on Jul 14, 2016 05:42 pm
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