Market still hopeful of SP-Congress alliance: Tulsian

SP Tulsian of sptulsian.com, in an interview to CNBC-TV18, said that the market may be up on a possible Samajwadi Party (SP), Congress alliance in Uttar Pradesh.

"The upside or movement of some stocks like retail, the market is taking it for granted that SP will not be able to form the government without Congress ," he told CNBC-TV18.

Below is the edited transcript of the interview. Also watch the accompanying video.

Q: Is that what the market is factoring in and recovering on the fact that it maybe the Samajwadi Party (SP) but it will probably be along with the Congress rather than without?

A: That is right. If you see the upside or movement of some stocks like retail, the market is taking it for granted that SP will not be able to form the government without Congress. This looks certain because SP is likely to have a final tally of anywhere between 170 and 175. They will definitely be not able to mobilize 30-35 seats from independent or RLD by breaking parties and attracting other parties.

Ultimately, they have to look upon the Congress' 40-45 seats which Congress will be having atleast in the final tally. Therefore, final combination if it emerges with SP and Congress, definitely we will be seeing Congress pushing for the reforms. As I said, the indication of that is seen getting reflected in retail stocks because FDI in retail is on the topmost agenda of Congress as indicated by its top leader, Prime Minister time and again.

Q: What do you think the Congress reaction will be because it has done quite badly even if the SP needs it to form a government? In UP it has done below its expectations, in Punjab it is losing out, in Uttarakhand it is neck-to-neck, so I guess the mood of the Congress center would be quite somber this evening. Do you think they would be in a mood to push ahead with market friendly policies or would they lean more towards populism right now with such a debacle in most of the states?

A: Sometimes you feel that the adamancy at the top level of the Congress party is very high. Sometimes you feel that it seems that they are not - the top levels feel that they are capable to take any kind of decision whether it is on the economic matter or on the populist matter or maybe in respect to the poll arrangements.

Coming to your answer, I don't think that populist measures can be tolerated by the country and by the people and even by the economy at this stage. This is the last Budget in which they have to be pro because the kind of policy paralysis branding which has been attributed to the party, if that has to get broken, which in fact has been happening with the Fuel Supply Agreement (FSA) signed by the Coal India with all the power generation companies. These kind of measures need to have that maybe the food security bill which they have initiated a couple of months ago has been a little slow should be kept on the backburner.

Let that be the agenda for the next Budget because that will have all kinds of populist measures. It will not care at that point of time about the power generation capacity additions, road, and infrastructure. It will just talk of the aam aadmi and all sorts of attractions given to the common man.

But sometimes you feel the kind of policy or the kind of directives are gone with the 20-point programme, 10-point programme, then they relied on the Gandhi family. But I think they are losing out with all their magic cards and now they have to come on the ground reality that if they have to perform in the larger interest of the nation even by throwing the populist Budget even in this year, I don't think that they can recoup much of the things in the general elections, which is scheduled to happen in 2014.

So on a larger scale, they have to change the strategy but as a stock market analyst, I think it will be a disaster if they resort to populist measures in this Budget. In my view, they have to be very pragmatic, very hardworking, very progressive in terms of the economic development.

There should only be one agenda that economic development should happen, and fortunately, the twelfth five year plan should in fact try to coordinate that; try to have - not 20% of the slice from that five year plan but must be 25-33% of the slice that we need to get all these things achieved in the next 12-18 months.

Q: Oil marketing companies had been rallying in expectations that post these elections atleast there would be some kind of price increase, does that still seem likely or do you think given the current context of performance, the Congress may choose to just sit on their hands till they get to the Budget?

A: I think that is overdue but I don't think that they will have a smooth sail. Take for instance, Mamata objecting or strongly opposing for any kind of petrol and diesel hike. I don't think that the stand of the Samajwadi Party will anyway be soft. They will not submit themselves that since you are giving us a support of 40-45 MLAs, let us accept that and go ahead.

For their political compulsion, they have to make the noises, but again, this is an economic decision. The sanity prevails at petrol price hike which is not bothering anyone. I don't think that rich people or the car owners need any kind of petrol subsidy. That should happen. In petrol at least, try to phase out the auto fuel subsidy, if not that, cooking fuel subsidy because you have no reason for the cooking fuel subsidy to get phased out so quickly.

So one must be very clear, take your allies into the confidence but I think the petro product price hike is inevitable maybe in petrol we may see a hike of Rs 4-5, in diesel it maybe marginal between Rs 1.50 and Rs 2.