• Investment World
• eWorld
• Catalyst
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest

B. Krishnakumar

With the imminent abolition of the quota regime for the textile industry from January 2005, is it the right time to buy Arvind Mills and Vardhman Spinning? — Tarun K. Gupta & Chandar

Vardhman Spinning (Rs 177.8): The outlook for this stock was covered last week under this column. As was observed, the stock price has ruled firm and has moved to the target zone of Rs 175-180. The outlook continues to be positive. It would, however, not be advisable to buy this stock now as it has moved closer to the resistance level of Rs 185-190. Wait for a break above Rs 195 and buy on dips. A drop below Rs 160 would be a negative trigger. Existing stakeholders may remain invested with a stop-loss at Rs 159.

Arvind Mills (Rs 77.7): The stock is on an upward trend and has the potential for further upside. Long-term investors may buy now, as well as on declines, with a stop-loss at Rs 57. Conservative investors as well as investors with a shorter-term horizon may peg the stop-loss at Rs 68. Existing shareholders may hold with a stop-loss at Rs 55.

What is the outlook for Bharat Electronics (purchased at Rs 517)? — Kamal Joshi & Tom

Bharat Electronics (Rs 458): There is no reason to sell this stock now. The price is likely to move past your purchase price shortly. A move past Rs 470 would confirm the positive outlook. Remain invested with a stop-loss at Rs 415. Partial profit booking may be considered if the stock faces resistance at the Rs 535-540 range. Risk-seeking investors may consider buying now with a stop-loss at Rs 425.

I bought Tata Motors at Rs 378.00 and Praj Industries at Rs 96.00. What is the outlook for these two stocks? — B. Karunanithi

Tata Motors (Rs 413.7): There has been a spectacular run-up in the price over the past year. After touching a high of Rs 570 in February, the stock has been on a decline. The reversal at Rs 570 is significant as the stock had formed a high at the same level in 1996. This could be a potential bearish "double-top" pattern that could have negative implications. It would, however, be premature to take a stance on the validity and the likely impact of this pattern. Moreover, a move past Rs 570 would negate this pattern. The recent price trends also point to the possibility of a break past the Rs 570 mark. A move past Rs 450 would be an indicator of the resumption of the earlier upward trend. There is also no reason to exit now. Hold with a stop-loss at Rs 390 for a part of your holdings. The outlook for the stock is covered elsewhere on this page.

Praj Industries (Rs 139.1): The stock has reached a short-term over-bought state. This could result in weakness in the near term. The expected decline should, however, be viewed as an opportunity to take exposures, as the long-term outlook is positive. Hold with a stop-loss at Rs 120. Short-term price weakness may be used to take long positions with a stop-loss at Rs 115.

I bought Moschip at Rs 40 and Sundram Fasteners at Rs 90. Should I sell or hold these stocks? — Suma

Moschip Semiconductors (Rs 30.2): There is no evidence of the completion of the downtrend that commenced at Rs 74 in December 2003. The stock could, however, seek higher levels in the short term. The stock price has been on a consolidation mode in the recent weeks and could seek higher levels of Rs 35-40. It would be safer to sell a portion of the holding if the price moves to Rs 40.

Sundram Fasteners (Rs 87.1): There are no signs of an upward trend; reduce exposures if the price moves past your purchase price of Rs 90. A decline below Rs 80 cannot be ruled out. A drop below Rs 84 would confirm that the stock is headed for lower levels. Reckoning the size of your holding, it would be appropriate to book profits as and when an opportunity arises.

What is the outlook for FDC and MRPL? — A.N. Malleswara Rao

FDC (Rs 39.4): The price has dropped steadily in recent weeks. There is no indication of the completion of this trend. A move past Rs 43 would be a positive development and could impart buoyancy. Conversely, a decline below Rs 34 would be a negative trigger and may push the stock to the Rs 25-28 range. Remain invested with a stop-loss at Rs 34.

MRPL (Rs 44.9): The stock could test the support level at the Rs 28-30 range in the worst case. Investors who have a stake may retain their exposures with a stop-loss at Rs 34. If the stop-loss gets triggered, fresh exposures may be considered on the evidence of support at the Rs 28-30 range. Aggressive traders may consider long positions at prevailing market rates and on price weakness, with a stop-loss at Rs 34. This is a risky short-term strategy, and a trailing stop-loss needs to be deployed as soon as the long position turns profitable.

I bought a large number of Vijaya Bank shares at Rs 69.05. I am thinking of selling a portion of the holdings in Vijaya Bank and invest the proceeds in Chambal Fertiliser and HFCL. Kindly advise. — G.R. Patil.

Vijaya Bank (Rs 45.4): There appears to be limited downside risk in the short term. The price could move to the Rs 52-55 range. It would not be advisable to sell now and redeploy the proceeds in Chambal Fertiliser and HFCL. A move past Rs 52 could push the stock to the Rs 58-60 range. Remain invested with a stop-loss at Rs 40. Take partial profits if the stock moves to the Rs 52-53 band. As far as investment in Chambal Fertiliser and HFCL is concerned, it would be advisable to take limited exposures in HFCL as its outlook is relatively better. The price chart of Chambal Fertiliser does not provide pointers about the near-term movement.

Please suggest two textile company stocks for buying, considering that several have risen sharply in the last couple of weeks? — Amit

After a few years, market interest has resurfaced in textile industry stocks. The price pattern and trading volumes have been quite erratic in the past. This makes the task of assessing the future price movement quite difficult. Based on recent price action, the outlook for Arvind Mills, Himatsingka Seide and Mahavir Spinning appear positive. Use price weakness to enter these stocks; the caveat is all long positions would require stop-loss at a level that you are comfortable and suits your risk profile. Trading or investing without a clear-cut plan or a stop-loss needs to be avoided.

I hold Alok Industries (bought at Rs 23). Should I hold or sell? — D.P. Gandhi

Alok Industries (Rs 59.1): The stock has been languishing in a narrow range over the past few weeks. Taking into account your entry price and the range-bound price action, it would be safer to book partial profits at the present level. A stop-loss for the rest may be placed at Rs 54. Those with a risk appetite may hold the entire with a stop-loss at Rs 5. A decisive uptrend would emerge only if the stock closes above Rs 65.

What are the prospects for Paper Products and Videocon International in the short and long term? — N. Ramesh

Paper Products (Rs 173.2): A few days ago, the stock has recovered from the crucial support level of Rs 157. The Rs 155-157 range has acted as a key support range; a breach of this range could have bearish implications. There is no reason to buy the stock now, as there is no evidence of the completion of the ongoing downward phase. Shareholders may have a stop-loss at Rs 154. At the moment, only a close above Rs 210 would reinstate the positive view.

Videocon International (Rs 38.4): The short-term trend appears positive. The stock could, at best, be ranked as a "scalp buy". The implication is that investors taking long positions can expect limited gains over a short time trading horizon. This is not a stock suitable for the buy-and-hold category of investors Those willing to take risk may go long with a stop-loss at Rs 33.

I am holding Corporation Bank bought at Rs 342 and Neyveli Lignite at Rs 48. Should I hold or sell? — Shibil

We would like to emphasise that trading or investing without a stop-loss would be a recipe for erosion in networth. There are several techniques to arrive at a stop-loss, depending upon the risk profile and the returns of the portfolio There is no point holding or enhancing exposures in an investment that has gone sour and led to losses.

Corporation Bank (Rs 229): As far as this stock is concerned, a series of lower highs and lower lows pattern is evident. This is not a healthy sign. Having held on to this stock and seen it drop from Rs 342, there is no point selling now. Hold and reduce exposures on price upticks. It would take time for the stock to recover to the levels at which you have taken exposures.

Neyveli Lignite (Rs 44.7): Though there is the possibility of moderate downside risk, the stock is likely to stablise and seek higher levels after the expected decline is completed. A rebound to the Rs 48-50 range appears likely. Hold with a stop-loss at Rs 32. Those uncomfortable with this level may opt for a higher stop-loss at Rs 38.

Readers can send in their queries, on not more than two companies, to

techtrail@thehindu.co.in

Queries can also be sent by post to:

Tech Trail, 859/860 Kasturi Buildings, Anna Salai, Chennnai 600 002

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)

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Investment Quiz

Copyright © 2004, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line