In an interview to CNBC-TV18's Anuj Singhal, SP Tulsian of sptulsian.com speaks about his readings and outlook on the fundamentals of the market and specific stocks.
Below is the verbatim transcript of the interview.
Q: Your first thoughts? It is clearly headwind after headwind for some of these liquor companies now and these stocks now.
A: That is right and I think this is a clear message that give up drinking and drinking habits and give up the investments into the brewery stocks also because if you really see the situation, that is right. Probably we are looking for this 500 metre as a trigger for Supreme Court. But if I just give you an example, in Mumbai, because even the main roads, if you take the city or the spots in the city like Dadar and all that, because highway starts from the place like Byculla and all that, so in fact, all the bars and all that or the restaurants which have been serving I do not want to name them here because the list is long, they have all be forced to close it.
If you are inside the main roads and all that, about 500 metre, then you are allowed to operate. So I do not think that there is going to be any kind of relaxation. And in fact, this is a pan-India move, this is not any political party having motivated. If this move had been motivated probably by the BJP, still we would have seen huge hue and cry by the socialist and maybe by the media and all that. But this has all started happening by all. First started with Kerala and then Bihar and now the Supreme Court judgement because earlier, we used only have the Gujarat state.
So, this is going to continue and this is going to get widespread amongst the entire country because maybe for law and order situation or whatever you may call it. So, in the given situation, there is no need to be brave. So, if you are holding the brewery stock, just exit from that and relax and look for other ideas.
Q: This is a stock specific question on United Spirits. What is the probability that Diageo looks at issues right now and says that I made last offer at much higher price than this. I am getting a good price to make an additional offer because that is something which has been on the table.
A: Sometimes, we are taking one sided view thinking that the last offer was at a much higher price, so they will not hesitate in going for another acquisition maybe to take their stake to 75 percent. Definitely that can happen, but see the fate of the investors, those who have invested into the stock or have not participated in the open offer at that point of time, I knew that many HNI's were taking a call that this is a very long-term story. Today they are regretting it. Here it is not the question of losing an opportunity. Here the question is destruction of your money.
If you have not exited from your stock, see the performance post Diageo. Forget the share price movement, we have not seen any kind of improvement in the financial growth. You cannot hoping against hope all the time that things will start improving from next quarter or next financial year. Even Diageo seems to be very much worried in respect to either integration or in respect to all these banks. They just cannot sell the wines in the air. Ultimately it has to get sold.
And the kind of ban or things which we are seeing, we are talking that people will not stop drinking. But maybe suppose if the ban continues for a couple of years, probably they may give us the habits of drinking as well. And definitely the growth will hamper and market wants growth whether it is 1 percent or 5 percent. They are not prepared to accept the degrowth.
So, maybe difficult for me to comment whether Diageo will use this opportunity because they are getting at much lower rate, but I do not think that this is a wise step for the investors, those who have just remained invested into the stock for last five years or maybe four years since Diageo has come in on the hopes that something will happen in respect to the growth or the performance of the company.
Q: The other stock that has done well today is Divis Laboratories, up 6 percent. Some of the products of course, have been exempted from that import alert. What are your thoughts on this stock now? Do you think the risk reward is favourable?
A: If you recall, for the last couple of weeks, I have been giving an advice that buy stocks which seem to have bottomed out and on Saturday when we have seen the company intimating to the exchanges that further drugs have all been exempted by US Food and Drug Administration (FDA) obviously it was expected that things will start looking positive for the stock going forward from here on. Because firstly, it is underowned, secondly, the stock also seems to be having short positions pending in the system which are likely to get covered.
And in fact, I have been giving for the last couple of weeks that stock have seemed to have bottomed out and those who wants to enter, I have been giving three stocks buy call, that is Aurobindo Pharma, Glenmark Pharmaceuticals and Divis Laboratories. So, I continue to have the same positive view on the stock because definitely, relaxation of further drugs by US FDA is seen positive for the company and this positive bias should continue maybe in the near-term for the next 3-4 days.
Q: Your thoughts on Oriental Bank of Commerce (OBC)? That stock is surging as we speak now, 8 percent higher on that.
A: Probably this technical factors are playing more in case of OBC because you have seen them going into futures and options (F&O) bans many times. Honestly, if you really ask me, I will not be able to pinpoint the specific reason for OBC though I have been keeping the positive view on all the larger PSU banks like Bank of Baroda, State Bank of India (SBI), Punjab National Bank (PNB), Bank of India, you can include OBC also in that category along with Union Bank, but specific reason for this upsurge is not known.
Q: Ujjivan Financial Services has now corrected quite a bit. It is in F&O ban also today of course, but over the last few days, it has seen a big correction from Rs 500 odd at one point to now Rs 386. Any thoughts on whether you would buy right now?
A: As you have said, it is now in F&O ban, so again it is due to technical factors and I will not be surprised to see. I think the stock seems to have bottomed out and this seems to be the excellent entry point for the investor and I will not be surprised to see the share moving to a level of Rs 420-425 in this series only by expiry because sometimes when these technical factors work, they stop the entry and exit of the fresh positions. And that is probably playing in this script as well.
And I do not think that much weakness is seen from here and I will advise a strong buy to the investor from the current level and as I said, I will not be surprised to see a price of Rs 420-425 maybe in the next couple of weeks or maybe by the time we see the April series expiry.
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