Here are SP Tulsian's top trading ideas

In an interview to CNBC-TV18's Anuj Singhal and Reema Tendulkar, SP Tulsian of sptulsian.com shared his readings and outlook on the fundamentals of the market and specific stocks.

Below is the verbatim transcript of the interview.

Anuj: A word on PSU banks, do you see more pain in some of these stocks? They have rallied a lot, but we have seen quite a bit of correction from the top and of course, the counter question in that, are these stocks good investment buys now after the correction.

A: Two things you have rightly narrated that in this last one month, if you see from their peak, they have all corrected by about 15-20 percent. But I do not think that the fundamental weakness is seen in the stock from here on much. If I take a call today, maybe two disappointments, one from the Maharashtra loan waivers where the market has been taking that all the hits will come on the heads of the bank, that will be incorrect to say.

If you have read or the statement having given by Finance Minister that if any state is giving the loan waivers, they have to put their house in order and that has to be borne by that particular state. So that will be a wrong assumption in taking that the farm loan waivers of Rs 40,000-50,000 crore of Maharashtra will come on the heads of all these PSU banks, number one.

Number two, from the meeting which the finance minister had with the PSU chiefs of all the banks, again, maybe probably on the consolidation because FM has said, market sometimes wants a trigger for correction, that consolidation has not been discussed because these are not the matters of, maybe the non-performing asset (NPA) resolution because if you have heard the statement of 89 insolvency petitions having filed of which about 18-19 have been filed by the financial creditors, that shows the speed at which the NPA resolution is being taken up by the banks.

Or maybe because there is a procedure, the joint lender forum will forward the proposal to overseeing committee. Overseeing committee will definitely be then taking a call thereafter. Still we have only two members in the overseeing committee where the committee has to get expanded or enlarged. So taking all this into account, in fact I am keeping quite positive view on all these PSU banks stocks. But the only point that you need to have the view of at least couple of months.

If you see the nature of these PSU bank behaviour, if you plot the chart for last six months, you will always find them of a high beta nature. If they start moving up they swiftly go up 15 percent. If they correct, they swiftly correct by about 10-12 percent. So this process of profit booking and correction seems to be coming to an end or maybe the shares are all seen bottoming out and then qualifies the stocks as a good investment buy. May not be giving comfort to the Futures and Options (F&O) traders taking long positions, but I am keeping positive view on all these PSU bank stocks from the current levels.

Reema: If the farm loan issue is not much of a problem for PSU banks, what about for Bharat Financial Inclusion because that stock seems to have lost 5 percent again on fears of this farm loan issue in Maharashtra. How would you read the weakness today and therefore, does the dip become a buying opportunity?

A: Again, that is again having a rub off effect. In that case, for all microfinance companies if you take two companies because Ujjivan Financial Services has already clarified that they do not have much exposure. But if I take a call on Bharat Financial and Satin Creditcare Network then definitely such events, when the farm loan waiver is given by the government, that does not cover the microfinance lending. But the farmers start agitations and all sort of things.

And in that case, the recovery gets delayed. So probably you may see the provisions getting accelerated the way we have seen in case of Ujjivan for Q3 which did not recover in Q4 because the company was expecting that majority of that will get reversed in Q4. So probably that may not happen for both the companies, Bharat Financial and Satin Credit. You may see the provisions getting accelerated because of this farm loan waiver issue because it is coming closer to the end of the first quarter, June 30 and all that.

So we have to take that into consideration that rub-off effect can be there on these two stocks. So my advice is that remain away because Bharat Financials as such, being on the news of likely takeover by IndusInd Bank and that news is not being discussed in the market, probably that is also keeping the sentiments low on the stock. But I am keeping a neutral to mild positive stance on Bharat financials, but not on Satin Creditcare. So one can avoid buying both the stocks for the time being and can focus more on the PSU banks.

Reema: Your thoughts on Escorts. It got a benefit today. The goods and services tax (GST) on tractor equipment was lowered. Escorts started the day higher, but now is currently trading about a percentage point lower. It has had a dream run, but is all the good news now priced in into this stock considering that it did not move up today on the back of good news?

A: You have said right that if you see the kind of valuations that it has been ruling, it has more than priced in whatever growth the company is likely to show even if we consider the good monsoon which is evident in the monthly sales of the May tractor sales. But I do not think the valuations or the price at which it is ruling now warrants fresh investment. In fact I have been saying this for the last one week that those who have been holding the stock can go for profit booking because you will not be surprised to see the share correcting by about Rs 50 and probably that may be a good re-entry point into the stock.

So definitely I do not think that the stock needs to correct on every news where GST has got reduced from 28 percent to 18 percent for the tractor spare parts and because of that stock should again start moving up when it is already ruling so expensive.

Reema: Motherson Sumi Systems has been quite the outperformer. It has rallied nearly 70 percent in the last one year. With the management commentary sounding so bullish, do you think there is more upside left in this stocks now?

A: If you read the language of the management or maybe Vivek Chaand, it is very assuring. Number one, that one year ahead you are meeting the target of USD 18 billion topline. Number two, he has said that we will be looking for a growth of 40 percent in case of the acquisition and third is the topline is vanity and bottomline is sanity. I think they are very smartly even going for the acquisitions not for the sake of doing that but that must add to the bottomline also.

In fact we have been holding extremely positive view on the stock for the last couple of years taking that the company probably will be the outperformer in the auto ancillary space and that is what is happening now. And lastly, he has said that I do not think that there is any dearth of finance required if you have the right acquisitions and he has already hinted that 3-4 acquisitions are lined up in the pipeline and probably that may get fructified in this financial year.

So taking all this into account, I do not think that you need more comforting words because we have always been focusing on the bottomline. I have always been saying that the topline is immaterial. In fact that has got proved in case of the dye, dye-intermediate stocks where the topline grew by about 20 percent, but bottomline grew by 500 percent. So if you are able to take the right call by hearing this management, you need to have the positive view and we are having a positive view on the stock going forward.

Anuj: A work on Piramal Enterprises and the kind of rally that we have seen here? Have you heard anything or are you recommending this stock?

A: We gave a buy call about three months back at Rs 1,800. Now if you take the business breakup of the company, this is more as an non-banking finance company (NBFC) having book of about Rs 31,000-32,000 crore. So I do not think that how far it is judicious to give such a high multiple when you have. I agree that all the NBFC stocks have risen.

If you talk like IIFL Holdings, Edelweiss Financial Services, JM Financial kind of stocks, I am not including the Bajaj Finance and all that who are more into the consumer finance and all that, but I think we are seeing some kind of momentum and at least as a fundamental analyst I have said that having recommended about three months back at Rs 1,800-1,900, I do not think that there is any justification to recommend the stock now at Rs 3,000 plus. In fact those who are holding, probably this momentum may continue, but it is better to book profit and get out of the stock.