The Hindu Business Line : Query corner

The stock is likely to resume its uptrend on the completion of the short-term downtrend that it is presently confined to. After a drop to support at Rs 740-750, the stock is likely to commence the next leg of utprend towards the target zone of Rs 890-900.

A drop below the stop-loss level of Rs 720 would warrant dilution of stake, as the stock could get into a slightly extended period of correction. This would not, however, negate the long-term positive outlook.

Reliance Industries (Rs 843): The near-term trend does not appear promising. The details of the short-term outlook are featured elsewhere in this page. With the scheme of demerger scheduled to take effect shortly, there is no point providing long-term targets, as the company in its present form would cease to exist with effect from mid-January 2006. The share price would also get adjusted in mid-January to give effect to the demerger.

It would not be logical to analyse the chart patterns and arrive at long-term targets based on the prevailing price data, as it would be irrelevant.

What is the outlook for KEC International bought at Rs 250? — Abhayakumar Shah, Vinod

KEC International (Rs 256): Remain invested with a stop-loss at Rs 235, as the long-term outlook is positive. The stock is likely to move to Rs 310-320.

Though the long-term outlook is positive, the stock could get into a short-term downward corrective phase.

A close below Rs 235 could push the stock down to Rs 200-210. Only a close below Rs 195 would negate the long-term positive outlook and would warrant dilution of stake. Investors willing to take risk may settle for a stop-loss at Rs 195. The rest may have the stop-loss at Rs 235. If the stop-loss at Rs 235 gets triggered, fresh exposures may be considered subsequently, on evidence of support at Rs 200-210.

I would like to have your views on Chennai Petroleum bought at Rs 262. — K.S. Kani

Chennai Petroleum (Rs 241): Though the short-term outlook is bearish, the stock could move to Rs 290-300 range on the completion of the corrective phase. The stock is likely to drop to Rs 215-220 before the resumption of the long-term uptrend. Hold with a stop-loss at Rs 210. Fresh exposures may be avoided for the moment.

I would like to know the prospects of Uttam Galva and Mangalore Chemicals. — G. Namasivayam

Uttam Galva (Rs 38): The share price has been on a major corrective phase since March. The recent price pattern suggests that this process is complete. If this view is valid, the stock is likely to recover towards the immediate target zone at Rs 48-50. This view would be invalidated on a close below Rs 34. A close below Rs 34 would indicate that the corrective phase is not complete and a much deeper fall may materialise. Investors may hold with a stop-loss at Rs 34.

Mangalore Chemicals (Rs 14.1): The near-term outlook appears bearish. A drop to Rs 10-11 appears likely. A close below Rs 13.5 would confirm the bearish view. Investors may look for exit opportunities, as there is limited scope for any significant recovery.

Please offer your views on TCS and BEML. Is it advisable to enter at these levels? — K. Prasad

TCS (Rs 1,672): The stock has been on an uptrend in recent months and has posted gains in excess of 50 per cent since May. There appears to be upside potential extending up to Rs 1,875-1,900.

Long-term investors may remain invested with a stop-loss at Rs 1,630. Investors who have entered at fairly lower levels may settle for a stop-loss at Rs 1,520. Fresh exposures may also be considered on a weakness, with a stop-loss at Rs 1,520.

BEML (Rs 1,021): The stock has been one of the star performers at the stock market over the past few years. Even after the flare-up in price in the last couple of years, there still appears to be upside potential. A move to Rs 1,200-1,250 appears likely. Investors who have entered at lower levels may continue to hold with a stop-loss at Rs 930. Price weakness may be used to enhance exposures with the same stop-loss.

Please let me know the outlook as well as the support and resistance level of Apollo Hospitals and Indraprastha Hospitals. — Suman

Apollo Hospitals (Rs 457): The price movement has been bereft of any trend in the recent weeks. The stock has been confined to a narrow trading band. Only a breakout from this band would impart momentum.

Price patterns in the stock suggest that an upside move may resume on the completion of the sideways consolidation that the stock is presently confined to. A move to Rs 490-500 appears likely. Fresh exposures may be avoided while investors may hold with a stop-loss at Rs 430.

Indraprastha Hospitals (Rs 38): The near term outlook is bearish and a drop to Rs 30-31 appears likely. It could be advisable to reduce exposures and have a stop-loss at Rs 35 for residual holdings. Fresh buying may be avoided.

What is the outlook for Bharat Forge bought at Rs 398? — Patwardhan Nijanand

Bharat Forge (Rs 386): The long-term outlook is positive and a move to Rs 450-460 appears likely.

The stock is likely to rule weak in the near-term. After a test of the immediate support level at Rs 365-370, the share price likely to commence its journey towards the target zone.

The positive outlook would be under suspect if the stock closes below Rs 350. Stop-loss for long positions may be placed at Rs 350. Fresh exposures may be considered on the evidence of support at Rs 365-370, with a stop-loss at Rs 350.

Kindly advise about my holdings in Alstom Projects purchased at Rs 226. — Vinod

Alstom Projects (Rs 206): The stock appears to be headed towards Rs 190-195 range. The trend is likely to turn bullish on the completion of the anticipated correction.

A close below Rs 180 would have negative implications. Investors unwilling to take risk may sell a portion of their holdings now and consider fresh exposures on a drop to Rs 190-195.

Stop-loss for long positions taken at this support level may be placed at Rs 180. Risk-seeking investors and those who have purchased it at fairly lower levels may remain invested with a stop-loss at Rs 180.

What is your view on Sundaram Finance? — Lakshmanan Shanmugam

Sundaram Finance (Rs 416): The outlook is positive and a move to Rs 465-470 appears likely. A rally towards this target zone is likely to commence after a short-term drop to Rs 400-405.

Investors may hold with a stop-loss at Rs 385. Exposures may be enhanced on the evidence of support at Rs 400-405, with a stop-loss at Rs 385.

What is the outlook for VSNL? Is it advisable to enter at the present levels? — Sandhya

VSNL (Rs 411): The stock could move to Rs 495-500 shortly. Fresh exposures may however be considered at lower levels as the stock could rule weak in the near-term.

A drop to Rs 385-390 appears likely. The stock may be purchased on the evidence of support at this zone, with a stop-loss at Rs 350.

Kindly let me know the prospects of Asian Paints and Ranbaxy Labs purchased at Rs 498 and Rs 396 respectively. — Rajesh M. Shah

Asian Paints (Rs 556): As there is upside potential even after the recent rally, there is no reason to sell the stock now.

Long-term investors may continue to hold with a stop-loss at Rs 500. Fresh exposures may also be considered, as the share price could move to Rs 675-700 range in the long term. Investors willing to take exposures for at least a year may include the stock in their portfolio. Stop-loss for all long positions may be placed at Rs 500.

Ranbaxy Labs (Rs 359.2): The stock has been one of the laggards in 2005. The recent price patterns suggest that a respite to the recent selling spree may be round the corner. The share price is likely to seek support at Rs 300-310 range. If it does so, there is a case for at least a pull-back or relief rally. A move to Rs 445-450 range may materialise subsequently. A close below Rs 290 would indicate that the earlier downtrend is not over and may result in further weakness. Risk-averse investors may sell a portion of the holding now and consider buying the stock at Rs 300-310 range. Fresh exposures may also be considered on the evidence of support at this range, with a stop-loss at Rs 290.

(Note: 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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