In an interview to CNBC-TV18’s Latha Venkatesh, Anuj Singhal, and Sonia Shenoy, SP Tulsian of sptulsian.com shared his readings and outlook on market and specific stocks.
Below is the verbatim transcript of the interview.
Latha: It is the IT stocks which are once again going to be in the limelight for the wrong reason. Now the rules have clearly come in that for lower level programmers, the company has to justify a lot more. Initially are you going to see negativity on those stocks, any advice?
A: If it is an admitted fact that the IT stocks will remain in focus for wrong reasons, so, obviously one has to avoid that and even keep looking to those stocks because probably you can divert your energy in identifying the other sectors.
Honestly if you really ask me, the weak rupee or maybe the US regulatory moves and all that are going to cause a lot of pain to the IT sector going forward and actually that is a reason we have all been saying that remain away from IT because that may be on the investment radar of the institutional investors because they are forced to have the investments in those sectors also because of the weightage in the Nifty or maybe because of the huge market cap of the stocks.
However, I don’t think that they are really meant for the medium-term or maybe the small or retail investors at this point of time.
Sonia: What is your view on Titan because the management has come out with a lot of positive commentary?
A: I am not keeping a positive view for the simple reason because of this cash spending and the company having changed their total focus from gold to diamond. I don’t know how far that diamond jewellery business can get ramped up from here on because that has been a very good -- the gold business has also been giving them a very good traction in the jewellery segment.
So, I am not very positive on jewellery segment going forward because the unorganised sector and the other brands are also getting crowded. Actually the customers are finding the price differential also to be too high in case of Titan in case of the diamond jewellery. So, taking all this into consideration, I am keeping a neutral view on the stock.
Anuj: The other space to focus on is the auto space. I know you have had your favourites like Mahindra and Mahindra (M&M), TVS Motors, but after having seen all the sales numbers, what stocks are you still buying?
A: Two stocks comes to my mind after seeing the sales number, one is Ashok Leyland and second is TVS Motors. If you see the growth and the kind of performance, probably Ashok Leyland has shown the highest monthly sales numbers in this last 24 months or maybe in last 36 months. Similar is the case with the highest sales having posted by the company in any quarter in this last maybe 8-12 quarters.
Similar is the case with TVS Motors because if you compare it with Hero MotoCorp and Bajaj Auto, Bajaj Auto having shown a de-growth of about 10 percent on a month-on-month basis, while Hero MotoCorp has shown a marginal 0.5 percent growth on month-on-month basis, TVS Motors has shown a very good traction. In fact having posted a monthly sale of 250,000 plus they are seen returning back into the 250,000 plus kind of trajectory which because the company has been posting the sales of maybe 210,000-215,000 for last three to four months. So, two monthly sales numbers really standout very well.
Overall if you see the commercial vehicles sales have been really very good, whether you take the situation on Eicher Motors or SML Isuzu. So, going by those comparative numbers also, Ashok Leyland numbers are also looking good. So, two monthly sales numbers are looking good, one Ashok Leyland, and second TVS Motors.
Sonia: A couple of these pharmaceutical stocks -- I know you track some of these names like Wockhardt, etc. closely, we have seen some good data and some bad, any of these stocks where there is still potential for investors or even traders to buy into?
A: I have earlier also stated that probably one can start looking for few larger pharmaceutical stocks and amongst them I have been keeping an eye on Wockhardt, Aurobindo Pharma, and Glenmark Pharma. These three look good and maybe Divis Laboratories inspite of the US FDA issues and all that.
I won’t be taking a renewed buy call or maybe the positive call at this stage on Dr Reddys. However, these three or four stocks are looking good amongst the larger pharmaceutical space.
Anuj: Rs 1,400 on Reliance Industries now, approaching Rs 4.5 lakh crore market cap. Phenomenal move but what next?
A: We have discussed this on Monday because if you take Rs 4.5 lakh crore market cap, add Rs 1 lakh crore, Rs 5.5 lakh crore EV and on that day I have said that you cannot attribute more than Rs 2 lakh crore for the refinery business, maybe Rs 1 lakh crore for petchem, maybe about Rs 200,000-220,000 crore for Reliance Jio then you have the other assets available maybe like media, or maybe like retail and all that.
So, maybe at some point of time I think that because the migration from free to paid of 7.2 crore subscribers has seen being quite good or maybe better than expectation than what market has been expecting. 15 days extension having given, one can expect that probably this tally can go to 8-8.5 crore.
However, still if you take a call going forward on the scenario, I don’t think that company will be able to post a revenue of more than about Rs 35,000 crore from the Reliance Jio alone for FY18. I won’t be taking the EBITDA call at this stage on Reliance Jio because of the huge capex. It is difficult to take a call of the interest and depreciation both because Rs 220,000 crore is the investment having made in this.
So, taking all this into consideration, probably Rs 1,400, in fact I have been taking a call of Rs 1,250 to Rs 1,350 on the stock, to move in this range. However, having moved beyond Rs 1,350 and now ruling closer to Rs 1,400, probably that seems to be the resistance or maybe the fair value at least in the near term for next one month or so.
Anuj: I wanted your thoughts on JSW Steel -- that is a stock which is also making a move back towards its 52 week highs.
A: I have been keeping again a positive view and more on JSW Steel because the kind of growth which we have seen in the steel sector, maybe post MIP, and India having turned exporters for last maybe five or six months, that has really given a very sound footing to all the steel makers and JSW Steel having a very significant capacity of 16-17 million tonne. Going forward, what I am in fact looking for JSW Steel is that they are seriously looking for one or two acquisitions.
If that happens, that will again be seen quite positive by the market because what they are looking acquisitions is more from the banks where the stress loans will be taken over, where the haircuts will be seen quite high. On the net present value basis if you take a call, because market has been considering that probably Monnet Ispat or maybe Bhushan Steel are all on their radar but Bhushan Steel looks quite big for JSW Steel. So, maybe one or two acquisitions are definitely likely to happen.
Even on their current working, they have all been doing quite well with the growth seen in their steel production, as I said maybe 15-16 million tonne capacity is doing quite well. So, keeping a positive view because I have a positive view on the ferrous metal stocks as well and JSW Steel in particular.
Anuj: What are your thoughts on Ujjivan and Bharat Financial, both are starting 3 percent lower?
A: This may be just a profit booking after we have seen a good run up. Bharat Financials has been moving in a range of about Rs 800-840 for quite some time and it will be again wrong to take that call because the UP government has written off or given a waiver of about Rs 35,000 crore to farm loans, that will have a negative impact on Bharat Financial, Satin Creditcare, or maybe Ujjivan because both things have no correlation at all because both the microfinance business and the lending we having made by the PSU banks and all that to the farm loans are totally different and I don’t agree that things are seen affecting in anyway these finance companies.
So, maybe after seeing a good run up, people probably are going for profit booking on the sentimental negative effect which should get erased maybe in next couple of days.
Latha: Are you tracking Delta Corp?
A: Yes I do and in fact we have given a buy call about a month back when the stock was ruling at Rs 130 or so. However, the stock having moved up to Rs 200-210 and if you see the peculiar behaviour of the stock, this is a very high beta stock which swiftly moves up Rs 40-50 and then corrects also. Maybe three months back when the stock moved to all-time high of Rs 180, people thought that it will never fall back from those levels but corrected to a level of Rs 120-125.
So, maybe I don’t think that this is a right time to make entry. In fact the strong hands, those who have been invested in the stocks, even they seem to be booking profits and entering again at the lower level. So, this is definitely not the price to look for fresh buying in the stock though as I said we have been keeping a positive view on the stock, but not at the current price of Rs 210.
Disclosure: Reliance Industries, the parent company of Reliance Jio, owns Network 18 that publishes Moneycontrol.com.
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