Exit Hindalco above Rs 63-64: Tulsian

Investment Advisor SP Tulsian is of the view that trader on the short-term horizon keep exiting Hindalco above Rs 63 or Rs 64.

Tulsian told CNBC-TV18, "The entire problem started for Hindalco with the acquisition of Novelis. If you heard the Chairman saying that probably the breakeven or the problems with Novelis should get over maybe it will get extended by another year by December 31, 2009. With all the fall of aluminium to the extent of USD 2,000/tonne will definitely be advantageous for Novelis, while it will be disadvantageous for the Hindalco local operations because they are making the virgin metal here. So that will get balanced out and I do not think that the beating of the share to this level is justified if you have a longer-term horizon because whatever debt they had of about USD 3 billion, which they have only been able to mobilize part of the amount with the rights issue but recently they have again been able to raise USD 1 billion definitely all these problems should get over maybe in next six-months time."

He further added, "With every fall in the aluminium prices, Novelis will stand to gain maybe that will affect the operations of the company here on the domestic front but remember the cost of production to Hindalco is less than USD 1,000/tonne and even if the aluminium prices rules at around USD 2,000/tonne they will be in a comfortable position to make a quarterly profit of close to Rs 500-600 crore on an equity base of Rs 175 crore. So I do not think that at these prices, you have any problem in having the shares acquired at Rs 56-57, if you have a longer-term horizon of about 6-12 months. But as a trader on the short-term horizon you may keep exiting above Rs 63 or Rs 64 whenever you see that kind of price. But this is not the price or the level at which you should sell or you should go short or you should exit from your existing holding."

Disclosure: Analyst has holdings in Hindalco and GVK.

Source: Moneycontrol