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Last Updated : Jun 28, 2017 04:11 PM IST | Source: CNBC-TV18

Here are SP Tulsian's top trading ideas

In at interview to CNBC-TV18's Anuj Singhal and Surabhi Upadhyay, SP Tulsian of sptulsian.com shared his views and outlook on the fundamentals of the market and specific stocks.

In at interview to CNBC-TV18's Anuj Singhal and Surabhi Upadhyay, SP Tulsian of sptulsian.com shared his views and outlook on the fundamentals of the market and specific stocks.

Below is the verbatim transcript of the interview.

Anuj: Asian Paints in particular has seen a bit of a correction today. We have seen Hindustan Unilever correct from its recent highs. Any of these stocks that you think is a good buy now again?

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A: Sometimes if you take a market call and market is always seeing the future events, we all know that the whole of June or maybe if you want to take a specific call, after first week of June, every dealer, whether he is a paint dealer or he is a fast moving consumer goods (FMCG) dealer has started going for destocking. And the effect of that will be seen in the Q1 numbers. In fact April and May, we have seen the bumper lifting of all the products. No goods and services tax (GST) effect was seen at all. But if you see in the month of June, obviously, because of a lot of confusion existing in respect to the credit being available of the excise and value added tax (VAT) having paid on the products, all the dealers and the distributors are seen deferring their purchases in the month of June because they want to exhaust all their inventory by June 30.

Just take the situation that what will happen from July 1. Obviously, all the replenishment of the stocks will start and that is what is happening at every level, consumer durable, FMCG, paint stocks. So I am not too worried because already this negative, in fact if you want to keep talking of the negatives, then that has already largely got factored in. but if you take the situation going forward, I think the huge benefit, just to give an example of the cement, people have all been talking of 28 percent GST seen to be high, but if you calculate everything, all the taxes and levies, the rate works out at 31 percent.

So I am not saying that 3 percent is going to the kitties of the cement makers, but that will see the good offtake, not jerk, no inflationary effect of this GST seen happening. So I am keeping a positive stance because always you need to take a futuristic view on the market. If you keep embracing the old negative news, I do not think that by doing that you can really make money. Come July 1 and you will find from the first week of July, hearing from all the manufacturers that they are seeing huge demand. Probably the logistic company and the manufacturers will all be flooded with orders for replenishment and that will be seen quite positive.

So I am not taking any negatives now of GST and in fact, yesterday also I have said in the same show that I am not seeing the correction happening because of the GST effect though the majority of the market probably they may be having their view. But I have my view that I do not see this weakness happening because of the GST effect. This was all known on the ground prevailing for the last three weeks or so. I am keeping a very positive view because of the GST. Come July 1, you will see the replenishment of the orders coming in from the stockists, dealers, retailers to the manufacturers going forward.

Anuj: We have been talking about this, a lot of stocks hitting Futures and Options (F&O) ban. Has time come to look at this concept of three months and revising it? If stocks keep hitting F&O ban, let us take them out of F&O.

A: Two or three things. Firstly, the free-float, that 20 percent need to get increased to 40-50 percent. That is number one. Number two, you need to have a revision or maybe remove those stocks which are even have gone maybe seven days in a month or in a series in F&O in stead of calling it for the significant time, number two.

Number three, if you take the call, in fact about 10-12 stocks always you will find them in the F&O ban. In fact I would say that the dirty dozen maybe concept can apply to these stocks more appropriately then the stocks which have been referred for non-performing assets (NPA).

Number of four, just let me add one methodology here. How it is done in majority of these stocks, there is a huge financing which is happening. I will not name the stocks here, though I knows the modalities and all. Take for instance, if a stock is ruling at Rs 100, what financer is doing, he is taking 100 percent security or margin or sometimes it is 200 percent also. So suppose if he has lent the Rs 100 by taking double the quantity of shares, what he will do, he will buy the put of 50 strike price the equal quantity.

So what will happen, suppose take for instance, sometimes we feel that no, the things cannot fall in such a manner. Take the case of Videocon Industries, I am not saying that that stock is into F&O but at one time, that used to be in the F&O and we used to see that kind of pattern happening. So what financer in that case is doing that he is buying half the quantity of the amount having lent. So suppose if the stocks fall from Rs 100 to Rs 20. He is protected because he is holding the double the quantity, he has bought 50 put by paying a very nominal premium of Rs 0.05-0.10 and he gets protected.

So in fact majority of these stocks which are into F&O bans are more to do with the financing having done by the large financiers. I do not want to name whether it is by non-banking finance company (NBFC) or it is by the private, generally it is all by the private financiers, those who are having deep pockets, high networth individuals (HNI) kind of things, so I think this is high time that SEBI should look into it and should curtail it because let me tell you, the retail investors are losing heavily because still there is a fancy amongst the traders that they love to trade into the F&O ban stocks thinking that it will only go up. But that myth again is wrong. It can fall or it can go in both way as structured by the so called financier or so called player or so called operator.

Surabhi: Is it a good time to enter Advanced Enzyme Technologies or Rane Brake Linings?

A: I have positive view on fundamental basis on both the stocks that is Advanced Enzymes and Rane Brake. And in fact, I expect that you need to have a view of at least one year because Rane Brake having recommended by us about six months back at Rs 600 now ruling at Rs 1,300 plus. Similar is the case with Advanced Enzyme now ruling at Rs 300 plus. So you need to have one year view minimum on both if you want to see the gain of about 25 percent from the current level, but I will not advise the viewer to buy both of them with a view of a couple of months.

Anuj: One word on Adani Group stocks. Adani Power, as we speak up 3 percent, Adani Enterprises up 3 percent. In the past, you have liked Adani Ports and Special Economic Zone. How would you approach them in terms of how to play these stocks?

A: Our view has not changed. We have an extremely positive view on Adani Port and Adani Transmission because Adani Transmission is not in F&O so generally it is not talked. But we have been keeping positive view and we have continued to have positive view on both Adani Transmission and Adani Port. Not keeping positive view on Adani Power because they want to exit from their power projects of Rs 4,000 megawatt and the large uncertainty looms large on that maybe about Rs 20,000 crore, Rs 18,000 crore will be taken a hit.

Coming on Adani Transmission, because of the revival of the Carmichael project, the group is seen determined of USD 16 billion project. That is giving a sentimental uptick on the stock of Adani Enterprise, but keeping positive view on Adani Port and Adani Transmission.

Anuj: One final question on sugar stocks. Do you think the rally continues? We have today also, Balrampur Chini Mills up 2.5 percent.

A: Let me give you the ground picture better. You call some promoter of Uttar Pradesh based mill and you can check with them, but what I have checked on the ground that the sugar prices have risen by about Rs 40-50 per bag and about Rs 3,680 is the price. And in fact maybe in Bihar market it is ruling at Rs 3,700-3,720 and lot of buying orders are seen having come in to the UP sugar mill for the first week of July. On the similar basis as I have said that the destocking is seen happening even in case of sugar stockists also because you always have in pipeline of about Rs 30 lakh tonne of sugar remaining with the distributors, with the retails and all that.

So I am expecting that huge demand will start flowing in from July 1 because of the festive demand and because of the stock replenishment and I am quite positive because except for UP bills, no other mills, whether in Tamil Nadu or in Maharashtra are having any sugar stocks with them. So obviously, UP mills will all be seen a big beneficiary because of this price rise which you have seen of Rs 40-50 per quintal as well.
First Published on Jun 28, 2017 03:57 pm
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