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Last Updated : Apr 12, 2017 08:29 AM IST | Source: CNBC-TV18

Here are SP Tulsian's top trading picks

In an interview to CNBC-TV18's Sonia Shenoy and Surabhi Upadhyay, SP Tulsian of sptulsian.com shared his readings and outlook on the fundamentals of the market and specific stocks.

In an interview to CNBC-TV18's Sonia Shenoy and Surabhi Upadhyay, 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.

Surabhi: Let us talk about a couple of the pockets that are excited today. In particular, all the tire stocks, some more duty measures coming in and of course, talk of price hikes as well by some companies. What is your reading? Would you buy anything fresh?

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A: Tyre stocks have all risen quite a lot. I agree that there has been positive news maybe of the falling rubber prices, increase in the selling prices. But probably the levels at which they have all been ruling, I am not comfortable as an investor. You may have the momentum, but momentum is not the right strategy now to look to buy any of these tyre stocks because the kind of volatility that we see, they have generally been seen trading in a range. When they correct, they correct swiftly by about 5-10 percent which we have seen in case of all these tyre stocks whether you talk of Apollo Tyres, Ceat, MRF and that is seen quite severe by a trader. So, I do not think there is any point or risk reward in favour of buying tyre stocks now at current levels.

Sonia: 16 percent lower on Adani Power. How have you reacted to this news flow and for an investor, what should the strategy be now?

A: The Supreme Court judgement has to be read very carefully and if you see this judgement, I will quickly touch upon what I have understood that court has said that there is no force majeure clause because if you really see and rightly so, why I say so because if you see Tata Power, Mundra Ultra Mega Power Projects and Adani, both were based on the imported coal and they have done their homework very well because if some companies going on the imported coal base, they have to secure the supply from the international market. And the change in the international law cannot be taken as a Force Majeure clause on which both these companies have been relying upon and they have fought before Central Electricity Regulatory Commission (CERC) and Appellate Authority and all sort of things.

So Supreme Court has given the judgement that the change in Indonesian law cannot be taken as a shelter by these companies to ask for a revision in the power tariff because they have submitted the whole structuring of the power project. If you recall, even the Krishnapatnam and Tilaiya projects which ADAG withdrew from both those ultra mega power projects, even they were based on the imported coal.

So, Mundra Ultra Mega Power Projects was based on imported coal and you cannot take the plea that Indonesian laws have changed and now, we have all been taken away with the mining rights which we have and because of that, we are asking for an increase in the price. And because there was, in the interim period for some time, there was shortage of coal, that probably because I have not read the judgement whatever the by-lines which I have been seeing here on TV that court has allowed only for that interim period that because there was genuinely shortage of coal either in the international market and for that only, that kind of price increase has been given.

So, I think this sets aside the entire all kind of confusions which have been prevailing upon both these companies, Tata Power and Adani Power for quite some time after the Supreme Court judgement.

Surabhi: Ashwani was just talking about Karnataka Bank and obviously the market has taken note of what has happened. I am not suggesting anything, but ICICI Bank, buying almost, it was 30 lakh shares, that is what the exchange filings revealed. Another bank which is actually flat today, Corporation Bank, but look at the one year chart just to give a sense of the waves of buying that some of these midcap PSU Banks have seen. Is there anything you would read into it? From the government's point of view, no one is openly talking about merger and acquisition (M&A) but midcap PSU banks, what do you think?

A: Difficult to take a call right now at this stage for the PSU merger, maybe M&A happening there because, State Bank of India (SBI) has recently happened. Definitely the things will be seeing happening in the PSU banks also. But may not be in the near-term in the next 3-4 months. But as regards the private sector banks, you referred the name of ICICI Bank, definitely, they have all been scouting for the acquisitions. And difficult to pinpoint that which are all the banks, whether you can name Karnataka Bank, Federal Bank, City Union Bank, there are many banks available either with no promoter or maybe with having promoter stake in a single digit.

So, that is bound to see happening, but specifically coming on PSU bank or maybe a bank like ICICI bank, in fact that is what I have been stating for the last one week that I am very hopeful on the resolution of the stressed loan and if you see the announcements which has been flashed on the channel that RBI or maybe the banks are not in favour of granting Scheme for Sustainable Structuring of Stressed Assets (S4A) status to Bhushan Steel, in fact that is seen positive though the market has seen that as negative because if they continue, if the banks for that scheme for the resolution of the structured assets, sustainable structured assets, if the banks take the call with the existing promoter, that is single, I do not think that at any point, because that too when there are prospective buyers lined up like Vedanta and JSW Steel having shown interest in Bhushan Steel.

So, banks will definitely be looking to go for strategic debt restructuring (SDR), have 51 pecrent stake as they have done in Monnet Ispat and then will look to induct the new partner. So, the resolution on the stressed loan assets and if you see the Finance Minister statement who has been saying that there are only 30 accounts, rightly so, because Rs 45,000 crore is the exposure to Bhushan Steel and if these kind of accounts get resolved, that will be seen very positive for the PSU Bank and the banks like ICICI Banks.

So, overall things are looking quite positive on the banking fronts whether from M&A space or from the resolution of the stressed loan assets which are expected to happen in maybe in the next couple of weeks. Some at least movement will start in that direction.

Surabhi: Any estimates as to what is going on and this is not just a one-day move, these stocks are sitting almost at one-year highs.

A: One point which has not been widely discussed is the power consumption or the power growth which you will be seeing in the UP state. If you have seen the video which has been circulating in social media of Piyush Goyal where he has been categorically said that by September 8, 2018 they are aiming to provide power 24/7 in UP states in all the villages and that is seen huge because let us not forget that 17 percent of the country's population lives in UP, about 21-22 crore people and we have all been knowing that UP has been power starved.

The work on war footing is going on for providing the power because we have seen huge investments having made in transmission and distribution (T&D) and even the instructions which have been given by Chief Minister and the Power Minister that change the transformer, improve the T&D line, cut transmission losses and those things are seen quite positive. So, what will be the effect that we will be seeing the advantage of operating leverages to all the power generation companies which have all been operating at a plant load factor (PLF) of maybe sub-70 percent as of now. And that will ultimately, eventually because if you see the maximum non-performing asset (NPA) in the financing field has been in the sector or steel, power and infrastructure.

So, if you are able to tackle the steel and if you are able to tackle the power, that will be seen quite positive. And Power Finance Corporation (PFC), Rural Electrification Corporation (REC) are power dedicated financials solely financing the power this one and that is the reason, today if you see the PTC India also, which I have been recommending for the last one week that PTC India is also looking quite good because that is the only company which is a power exchange or which is a power trading company.

Sonia: Any takeaways from the latest that is coming in from the UP Cabinet? And anything that investors can bet on?

A: I was coming on that only. If I just quickly finish off this sugar arrears that Rs 6,000 crore of that only Rs 3,800 crore is due from the three listed mills that is, one is Bajaj Hindustan, second is Simbhaoli Sugars and third is Rana Sugar. Except for this, there are no dues from any of the sugar mills, let me make that categorical statement, number one. Number two, I have stated that the replacement for transformer which is critical for the uninterrupted power supply.

And if you go into the transformer space and yes, you have referred Transformers and Rectifiers but add the name of Voltamp Transformer, Bharat Bijlee, GE T&D India, CG Power, they all are seen the huge beneficiary and in fact, that is what I was referring to that work is going on on war footing and as I said, September 8, 2018 that means about 15 months from here, when the centenary celebration of Pandit Deendayal Upadhyaya will get over, they have set the target of providing power to all 24/7 in entire UP and that has been their biggest promise on which they will not falter because 2019 general elections is all there on their minds.

So, yes, that is what I was saying that hugely positive for power sector and for the sugar sector, for the sugarcane areas, eventually that will also be seen positive because of the consumption increasing in UP and as I said, there are none of the listed stocks except these three sugar that is Bajaj Hindustan, Simbhaoli and Rana who have the sugarcane areas in the private mills. So, overall very positive for the power generation company, very positive for the T&D space and very positive for the sugar mills going forward.

Sonia: ITC, once again has bounced back on the buyer's radar. Today as well the stock was up about 3 percent. At this level of Rs 282, how are you positioned in ITC?

A: I have always been maintaining that probably ITC moves in a range and you see more kind of technical trades in the stock happening. Sometimes, if you want to have the positive bias seen building in the market, this is used as a tool, so I have never been looking at stock from an investment point of view. If you are trading in a range, probably this is the time to exit and look for the stock to correct by about Rs 8-10 and enter again at those levels.

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First Published on Apr 11, 2017 05:48 pm
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