Renuka, Sakthi turn sweet; Sesa Goa is hot magnet: Tulsian

In his analysis of the day's stocks on CNBC-TV18, SP Tulsian of sptulsian.com is positive on all sugar stocks, except those based in Uttar Pradesh, due to the benefits from the government removing all limits on exports and a falling rupee. He is also confident that the Sesa Goa merger will go through and adds that it is poised for growth thanks to the increased variety in its product range.

Below is an edited transcript of the analysis on CNBC-TV18. Also watch the accompanying video. Q: Is the worst of the price correction in for the cement stocks or will this correction drag a bit longer?
A: I maintain my negative stance on Century Textiles and JP Associates on the quantum. I do not think that the technical positions seen in the last one week have unwound, but in the case of ACC and Ambuja Cements there is a strong grip of the short-term traders.
This morning ACC held at Rs 1,230-1,235 on short-term technical forces or the management staving off the effect of the damages. But that may not happen in the case of JP Associates and Century Textiles.
So a negative view maybe taken on JP Associates, Century Textiles and India Cement which at Rs 78 is seen to be a good support and has been witnessing good buying for last week or so ahead of the CCI order. The stock can also be considered for creating long positions at these levels. Q: Sugar stocks have seen quite a run today. Shree Renuka is up almost about 7-8% this week. Is there more on the trading side there?
A: Yes, I think so. Shree Renuka will start its crushing season very soon. One of the units has already started the production. A weakening rupee and a firm white sugar prices at about USD 600 are making the realisations better in India.
With the off-season, the inventories are also seeing better realisations especially in the western and southern parts of the country. I will hold a positive outlook in the short-term on Renuka and Sakthi Sugars, but not on the UP-based sugar mills. Q3: Jubilant Foodworks has corrected quite a bit today. SEBI is conducting a probe on stock manipulation by the promoters. How would you approach this stock?
A: I have maintained allegations of manipulation for the last six months coupled with the fundamental valuation. The price movement and the kind of unloading by the promoters in small portions of 2-3% are suspicious. Though it is difficult to allege the involvement of promoters in the run-up, one can definitely say that the fundamentals don't justify this kind of valuations.
Increased volatility was also observed in the stock and a couple of months ago it used to trade in the range of Rs 850-1,000 and fluctuate by Rs 100-150 within a week's time. Now the fluctuations are by Rs 1,100 to Rs 1,200. So if the inquiry finds anything fishy, the stock can correct to a great extent and fall to about Rs 600-700. Q: Do you expect the Sesa-Sterlite merger to go through smoothly?
A: I think this is likely to go through. But the promoters that the Vedanta Group have to consider that the group does not have a reputation of being on good and friendly terms with its public investors. But I do not think that the merger will be stalled.
The promoters should take into consideration that the transfer of the Cairn's holding into the Sesa-Sterlite at Rs 395 per share, assuming the rate of the Vedanta Aluminium merger with Madras Aluminium which is now a delisted company, will offer very poor valuations to the shareholders of Madras Aluminium.
_PAGEBREAK_ Q: Do you see any further upside in sugar stocks with the government allowing them to export as much as possible and the cumulative benefits of a fall in rupee?
A: That will not benefit all sugar companies. The UP-based sugar mills will not be able to export even a single grain of sugar. But yes, it will be quite positive for the companies based in the coastal regions of Tamil Nadu and Maharashtra.
If you need to choose two or three sugar stocks, Renuka and Sakthi Sugars look quite well placed. Both companies have been very aggressive in exports. I am maintaining my positive stance on both stocks and still see upside of 10-12%. Q: During this entire week, many of the metal stocks have done very badly. Hindalco is down about 5%, Steel Authority of India Ltd (SAIL) has lost close to about 3% on the back of declining commodity prices. Would you recommend the addition of any metal stock to investors’ portfolios?
A: Considering that Sesa Goa-Sterlite merger is likely to go through, the size and the consolidated operations of Sesa Goa will be a mix of ferrous and non-ferrous products.  With the crude portfolio of Cairn India also coming into the company, one can look to buy Sesa Goa.
Taking a call on Sterlite Industries- once the merger is approved, then the the arbitrage opportunities will make Sterlite logically rule at 57-58% of the share price of Sesa Goa.
If you take a call right now, there is an arbitrage opportunity of Rs 4-5 and going by the current orice of Sesa Goa, Sterlite should logically rule at Rs 103-104. But even on a long-term fundamental point of view, Sesa Goa is a good investment.