Can I purchase Adani Enterprises and LIC Housing Finance at current price? What are the prospects for this stock?

Rajeev Gera

Adani Enterprises (Rs 141.5): The decline in Adani Enterprises from the peak of Rs 740 in July 2011 has dragged it towards its medium-term support level at Rs 150. The stock reversed higher from this level in September 2012.

It is not advisable to buy the stock at this juncture since there are no signs of reversal evident on the chart yet. The short-, medium- as well as the long-term trends are currently down.

The stock is making a very feeble attempt to hang on to the support zone between Rs 140 and Rs 150. But breach of this level will drag it lower to 2009 trough at Rs 119.

Medium-term resistances are placed at Rs 300 and Rs 387. Investors can consider buying the stock on a firm close above the second hurdle.

LIC Housing Finance (Rs 165.8): This stock had a precipitous fall from the high of Rs 280 recorded in May this year. But investors can draw comfort from the fact that the stock is halting at the 50 per cent retracement of the rally from 2008 low that occurs at Rs 164.

This is a key Fibonacci level that supported the stock in January 2011 also. It is possible that the stock manages to reverse higher from this level again. That said, the rebound from this level is very feeble and there is a strong likelihood of the stock declining towards the next long-term support at Rs 140 or Rs 132.

Investors can buy the stock in declines with stop-loss at Rs 130. Breach of this level will mean that the long-term trend is reversing lower. Medium-term resistances will be at Rs 210 and Rs 245. Investors with short- to medium-term perspective can exit the stock on rallies to these levels.

I have invested in Andhra Bank at Rs 125 and NMDC at Rs 185. Please advise on the outlook for these stocks. Can I average them and exit?

B. Krishna Murty

Andhra Bank (Rs 49.8): Andhra Bank is in a strong structural down trend. This decline has pulled the stock well below the long-term trend deciding level at Rs 97. The stock has also fallen a long way below your cost price. You can hold the stock with stop-loss below its long-term support at Rs 37, which is not too far away.

A rebound from these levels can take the stock higher to Rs 80 or Rs 135. Failure to move beyond Rs 80 will mean that the stock continues to be in the bear’s grip.

NMDC (Rs 118.9): This stock has been in a severe downtrend since the high of Rs 572 recorded in January 2010. A fresh-leg of this decline that commenced at the peak of Rs 200 in September 2012 had almost halved the price. A nascent uptrend is unfolding from the low of Rs 92 recorded in August this year. This uptrend will face resistance at Rs 137 and then at Rs 162.

Failure to clear these levels will imply that the stock will decline towards the long-term support at Rs 68 or even lower. The long-term view will turn conducive only if the stock goes on to record a strong weekly close above Rs 200. Next hurdle for the stock will be at Rs 280.

Kindly let me know the future of Jaiprakash Associates.

S. Mani Kandan

Jaiprakash Associates (Rs 33.1): Jaiprakash Associates has drawn close to its long-term support around Rs 30. The stock reversed higher from this area in October 2008. This can be called the last bastion for long-term investors. Decline below this level can cause steep erosion in stock price with a strong likelihood of decline below Rs 10 level.

Investors should, therefore, exit the stock if this level is breached. Medium-term resistances for the stock are placed at Rs 60, Rs 78 and Rs 110. Long-term outlook with turn conducive only on a close above this level.

Risk-averse investors can, therefore, consider exiting the stock at current level and re-entering on a close above Rs 110.

Can you advise on the medium-term trajectory of Gruh Finance bought at Rs 644?

S. Pylur

Gruh Finance (Rs 200.5): Gruh Finance is moving within a long-term trading range between Rs 180 and Rs 250 since the last quarter of 2012. The medium-term trend in the stock has, however, been down since the peak of Rs 245 recorded in July this year. Medium-term supports to watch for are at Rs 188 and Rs 178.

Investors can buy the stock in declines as long as it trades above Rs 178. But break below this support will result in the stock moving lower to Rs 160 or Rs 135.

Medium-term resistances for the stock are at Rs 227 and Rs 250. Target on a break above Rs 250 is Rs 304.

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(This article was published on August 31, 2013)
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