Here's why Tulsian is positive on sugar, non-index stocks

Sonia: I wanted your thoughts on Reliance. It has been very steady for the last two or three weeks and now less than 8 percent away from its 52 week high. Do you see more traction in Reliance?

A: I will be keeping my neutral view on Reliance Industries because I have said that earlier also because telecom is not going to see any contribution in the FY17 numbers because of the free plans having extended till March 31. If you see the situation going forward, the things are only contributed by the refinery segment and petchem.

Petchem is definitely doing well. So, all these things amounts to share trading in a range only and sometimes if you see the behaviour or the price movement of Reliance Industries or HDFC kind of things, they are seen more of a tactical move by the traders to balance the index or to keep the Nifty under control because of their heavyweight nature in the weightage in the Nifty and Sensex.

So, I will be keeping neutral stance. This is more of a trading stock which can be used to trade in a range but not as an investor. I will not advise to buy as an investor.

Anuj: What is happening with Indiabulls Housing? It has traded more volumes than all of the Nifty stocks today in the cash market and is the top traded F&O counter, huge built up. Clearly something is wrong. It just doesn't look like it is the normal Non-Banking Financial Company (NBFC) scare because most of the other NBFCs have recovered, but this one is down quite a bit?

A: We have to in fact find out the reason for that. Maybe sometimes what happens because of the huge Foreign Institutional Investors (FII) holdings or the overseas inventors having invested in the stock we see that sometimes the classic case being that Tata Motors where FII wanted to sell and the management has come and lent the support, in fact saying that they are increasing their stake in the company. So, probably that may be happening and when these kind of deals happen they happen at a price. This is stated generally by the buyer and maybe either to accommodate that because if you take a view on the housing finance company, take the comparable peers. You can say that probably Indiabulls Housing is better in terms of the market fancy and corporate governance than Dewan Housing but that has not seen having corrected so much. I am not comparing Indiabulls Housing with HDFC or LIC Housing or Can Fin Homes Limited or GIC Housing.

So, in isolation if any housing finance company is correcting that too having good fundamentals but the best part about this stock is that swiftly you can call it as a high beta stock which swiftly corrects by about 8-10 percent in a couple of weeks and equally moves up with the same pace of 8-10 percent in the next couple of weeks. So, I won't be taking my negative stance on the stock but yes, the reason for such a high volume is not known which is making it to correct. In fact yesterday we have seen it correcting, today we have seen it correcting. So, there has to be some reason but that reason is not known but I am not taking a negative view on the stock.

Sonia: Two of these stocks that have seen a big hit post demonetisation and I have not seen any recovery at all, Asian Paints and Zee Entertainment. I know we have discussed these stocks in the past but at any point would you look to put any money in either of these heavyweights?

A: Maybe I will go with both because first if you see the reason for Asian Paints, because it has seen a lot of frenzy, it has turned very expensive and post the Q2 season getting over because Q1 and Q2 are always seen quite good for the pain stocks and after that you see the lull and because of the demonetisation effect and the crude rising, the stock seems to have corrected. However, yesterday also when we discussed about Pidilite, I have said that Pidilite and Asian Paints both seem to have bottomed out and if I am an investor, I will definitely take a buy call on both.

Coming on Zee Entertainment, same view was there when we saw Q2 numbers. They were not bad but they were not very exciting also. However, that has made the stock to move to a level of Rs 535-540. After the channel has acquired for about Rs 300 crore some three or four channels from ADAG Group that idea was not liked by the market and since then it has been correcting. However, after correction, Zee Entertainment seems to have corrected to a level of about Rs 440 or so. I think that stock has bottomed out and I don’t see much weakness from here. So, maybe I will buy in both the stocks, Asian Paints as well as Zee Entertainment.

Sonia: We have seen a lot of non-index largecaps rally significantly over the last fortnight or so. Any stocks that you have your eye out on now where one can see a good buying opportunity?

A: That list is endless. If you say the non-index stocks because I have always been taking the positive view for whole of this 2016 on the non-index stock and this strategy has really worked out very well. But one sector comes to my mind that is sugar which people have not yet taken a call on but they don\\'t understand the kind of profitability which they have been seeing and demonetisation effect is seen to be the least. If you take a call on the UP based sugar mills where the crushing is going on at the normal pace while the sugar prices have kept hardening and if you see the inflation figure also the sugar prices have not softened and that is likely to continue and the kind of production estimates will only be known by the end of January and when the figures will be estimated at about maybe 221 million tonnes against 25 million tonnes which we have seen for the season which has ended then definitely that will add fuel to the fire.

So, I am keeping a positive stance on the UP based sugar mill for the simple reason that no disruption is seen in the crushing. Secondly very good recovery. In fact the recovery of many of the mills are seen better than what it has been in the last year and I have maintained that in my earlier few shows also that FY17 is going to be seen the highest profits to be posted by few of the better managed companies in UP sugar belt. So, keeping a positive stance on that sector where about maybe 4-5 companies can easily be picked up but as I said there are many other ideas but this is just for an example and second could be the natural resources in the ferrous field. That area is also looking to me very promising.

 Anuj: What are your thoughts on Bajaj Auto and Eicher Motors?

 A: This segment of the higher cc, higher capacity will definitely be getting crowded. The next eye we have to keep is on TVS Motors and I won’t be so circumspect definitely because Bajaj or Rajiv Bajaj, the kind of homework they all make, I don’t think that they will be seeing, I am not saying that they will dislodge the Royal Enfield because that is on a supreme position, the kind of targets Royal Enfield has given of about maybe 60,000 plus on an annualised basis. So, I am not saying that but definitely that space will get dented by these two players right now by Bajaj Auto and then I will be keeping a watch on TVS Motors also.(Disclaimer: Reliance Industries owns Network18 Media and Moneycontrol.com)