The Hindu Business Line : Query corner

Tata Power (Rs 237): After a sharp upmove in the year 2003, the share price has been in a corrective phase over the past few months. There appears to be little downside from current levels. Those willing to take the risk may remain invested with a stop-loss at Rs 200. The stock is likely to bounce back towards the Rs 300 mark on the completion of the present leg of decline. A drop below Rs 200 would indicate the stock has further ground to be covered on the downside. This would warrant dilution of holdings. Conservative investors and those holding profitable positions may sell at market rate and contemplate re-entry once the stock moves past Rs 275.

Is it advisable to buy Alembic at current price levels? What is the outlook for TVS Motor, bought at Rs 110? — Ramesh Kumar

Alembic (Rs 113): The stock appears to have recently completed a major upward move at Rs 220 (price adjusted for bonus). The ongoing decline is a correction to this uptrend. The share price is likely to drop to the Rs 95-100 range before commencing the next round of rally. Given the possibility of further decline in the near term, fresh buying may be deferred. Existing holders having a profitable position may reduce exposures and contemplate re-entry on declines.

TVS Motor (Rs 66.2): There is a possibility of the stock falling to the Rs 55-58 range in the near term. The recent downtrend is, however, likely to be completed after the expected drop. Having held on to the stock right through the fall from Rs 110 to present levels, it would not be advisable to exit now. Conservative investors may sell a portion of the holdings at prevailing prices and consider re-entry on the evidence of support at about Rs 55. Those with a slightly higher risk profile may hold on with a stop-loss at Rs 54.

I bought Havells India at Rs 130 and Nagarjuna Constructions at Rs 160. Shall I hold or sell? — Sanjay Srirang Kale

Havells India (Rs 106): The share price is ruling close to the key support level at the Rs 100-102 range. A breach of this level would have negative implications for the stock. Taking into account the relatively high volatility and low floating stock, it would be safer to have the stop-loss at Rs 93 instead of bearish trigger level of Rs 100. Either partial selling may be considered or a trailing stop may be deployed if the stock moves closer to the resistance zone of Rs 130-135.

Nagarjuna Construction (Rs 136): There appears to be little downside risk from present levels. Long-term investors may hold on with a stop-loss at Rs 110. Those who are uncomfortable with such a stop-loss may reduce exposures on a drop below Rs 123. Investors who are risk averse may sell at current levels and take fresh exposures on a move past Rs 160.

What is the outlook for Tata Infotech and Omax Auto? — V. Sriram

Tata Infotech (Rs 357.2): There is a risk of a fall to Rs 275-280 levels if the stock declines below Rs 340. Remain invested with a stop-loss at Rs 338 and use price upmoves to sell a portion of the holdings. The stock faces resistance at the Rs 375-380 zone. Reduce exposures on evidence of weakness at this price range.

Omax Auto (Rs 60): Though there is a possibility of a short-term upmove, the stock is likely to seek lower levels after the completion of the expected upward move. A move to the Rs 72-75 range appears likely. The stock could trace a journey down to the Rs 45-50 range thereafter. Remain invested with a stop-loss at Rs 55 and use upmoves to pare exposures.

Kindly advise on the prospects of Bata India and VSNL bought at Rs 73 and Rs 191.5 respectively. — Daran

Bata (Rs 53.5): Look for opportunities to lessen holdings as the stock could seek lower levels. A drop below Rs 49 would result in the continuation of the recent downtrend. It would take quite an effort and time for the stock to get back towards your purchase price. Hold with a stop-loss at Rs 49 and sell a major portion of holdings on price upmoves. On the downside, a test of the Rs 30-32 range is not ruled out.

VSNL (Rs 139.7): The share price is likely to drop to the Rs 95-100 range. Taking into account the price at which you have purchased, the chances of breaking even appears fairly remote. It would be safer to cut losses by utilising price upmoves to sell holdings. At the moment, only a move past Rs 160 would reinstate some buoyancy and also warrant a re-look at the bearish outlook.

I am holding Hindustan Zinc bought at Rs 135 and Mercator Lines at Rs 245. Kindly advise whether I should hold or sell these shares. — K.S.Reddy

Hindustan Zinc (Rs 74.4): The stock appears to have completed the downtrend that commenced at Rs 145 in December 2003. The downside risk appears marginal from the present price levels. The stock could recover to the Rs 95-100 range shortly. Having held on to the stock right through the drop from Rs 135 to Rs 74.4, it would be worth the risk to remain invested with a stop-loss at Rs 60. Only a close below Rs 60 would be a cause of concern.

Mercator Lines (Rs 235.3): The stock could move up to the immediate resistance level of Rs 248-250 in the short-term. Remain invested with a stop-loss at Rs 221 and use this upmove to reduce exposures as the share price could drop to the Rs 200-210 range after the completion of the expected upward move.

I purchased Global Trust Bank at Rs 19, a month ago. I bought a huge lot at Rs 14 to average the purchase price. Should I hold or sell at current rate. Also advise on India Cements bought at Rs 42. — Somu Nageswara Rao

Global Trust Bank (Rs 12.6): The stock has broken below almost all recognisable support levels and it currently ruling at historic lows. Based on the price history and chart patterns, there are no significant levels to have a stop-loss at. Having witnessed the share price drop from Rs 19 to current levels, it would be better to wait for a while before reducing exposures. As such, it is difficult to comprehend the direction of the near-term price move as well as the potential downside target for the stock.

India Cements (Rs 29.1): The outlook for the stock is not positive. A drop below Rs 27 would have negative implications and could pave the way for a drop to the Rs 18-20 range. Hold with a stop-loss at Rs 27 and reduce exposures on intermittent price upmoves.

What is the outlook for Kochi Refineries purchased at the rate of Rs 170. — Suja Shaji & Shari Marie

Kochi Refineries (Rs 149.4): Remain invested with a stop-loss at Rs 138. The stock has completed a major upmove at Rs 223 a couple months ago. If this view is valid, the stock is likely to be in a prolonged corrective phase. An eventual test of the Rs 100-110 range is not ruled out. In the near term, the stock could see a relief rally to the Rs 165-170 zone. Use this rally to reduce exposures. Fresh buying may be avoided for the moment. Evidence of support around the Rs 125-130 range may be used to take fresh exposures with a close stop-loss in place. Investors planning to buy huge quantity may do so in a phased manner instead of investing the budgeted quantity in a single transaction.

Kindly analyse the possible downside target price of Bharti Tele if it breaches the support level of Rs 125-128. — Sadiq Pasha.

Bharti Tele (Rs 135.6): A drop to Rs 85-90 is not ruled out, if the stock breaches the support level at Rs 125-128. Investors may have a stop-loss at Rs 124. Fresh buying may be avoided.

I hold Balaji Tele at Rs 105 and Man Industries at Rs 120. What is the technical outlook for the two? — J.K. Balla

Balaji Tele (Rs 65.2): The outlook for the stock appears weak. Look for avenues to reduce exposures. A test of the Rs 48-50 range is not ruled out. Sell at least a portion of the holdings on price upmoves; fresh buying may be considered on evidence of support at about the Rs 45-48 zone.

Man Industries (Rs 66.4): There appears no downside risk from present levels. This view would be negated if the price declines below Rs 55. Remain invested with a stop-loss at Rs 55. On the upside, a rally to the Rs 77-80 range appears likely. A move past this level could pave the way for rally to the Rs 95-100 range.

With the price having declined sharply, I want to buy Maruti Udyog and Grasim. Kindly advise the technical position and the stop-loss I should maintain for both the stocks. — Girish Bhatia

Maruti (Rs 392.8): The stock appears to be in a consolidation phase. It would be safer to wait for a breakout before committing funds in this stock. A move past Rs 440 would impart positive trend; a fall below Rs 360 would have negative implications. Compulsive investors may take exposures in small quantity at present levels with a stop-loss at Rs 375.

Grasim (Rs 915.4): The recent downtrend does not appear complete. A drop to the Rs 825-850 range appears likely. It would be advisable to wait for declines to take exposures rather than investing at present levels. Long positions in limited quantity may be considered if the stock moves past Rs 1,000, without dropping to the Rs 825-850 range.

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We would endeavour to answer as many queries as possible. However, constraints of space will limit the responses featured under this column.

(The analysis and opinion expressed in these columns are based on the technical analysis of the past price behaviour. Opinion and price targets are based on the Elliott Wave Analysis. The stop-loss level provided with the recommendation is important. The original view would stand negated if the stop loss level is breached. There is a risk of loss in trading)

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