The Hindu Business Line : Query Corner

Jindal Stainless (Rs 97): The outlook does not appear positive. There is a possibility of a drop to Rs 80-Rs 82 if the stock closes below Rs 90. Only a close above Rs 115 would impart strength and negate the bearish outlook. Hold with a stop-loss at Rs 90 and look to reduce exposures on rally.

Hindustan Construction (Rs 154): The outlook for the stock was featured under the "focus of the week" column recently (edition dated December 25). The share price has moved past the price target of Rs 145-Rs 150 mentioned earlier. The recent price action indicates further upside potential. A move to Rs 185-Rs 190 appears likely. Taking into account your entry price and positive outlook, it would be advisable to remain invested with a stop-loss at Rs 129. Use a trailing stop-loss in the event of a move past the target zone.

I would like to have your views on Titan Industries bought at Rs 796 and Reliance Capital at Rs 450. — Kanchan Garg

Titan Industries (Rs 747): There appears to be marginal downside risk from prevailing levels. The stock has been in a corrective phase since early December. Though there is a case for this corrective phase to have been completed at the recent low of Rs 707, it would be safer to wait for confirmation. A close above Rs 780 would indicate that the correction is over and the next leg of the upward move to Rs 995-Rs 1000 is underway. On the other hand, a close below Rs 700 would indicate that the stock would drop to Rs 675-Rs 680 and the move towards the target zone would resume subsequently. Hold with a stop-loss at Rs 700.

Reliance Capital (Rs 456): The long-term outlook is positive and a move to Rs 495-Rs 500 appears likely. The view would be negated on a close below Rs 415. Investors may hold with a stop-loss at Rs 415. Fresh exposures may also be considered on weakness, with the same stop-loss.

What is the outlook for Rana Sugar bought at Rs 35 and Prajay Engineering at Rs 122? — Nagesh

Rana Sugar (Rs 49): The share price could move to Rs 53-Rs 55 in the near term. The outlook would be valid as long as the stock holds above the stop-loss level of Rs 40. Hold with a stop-loss at Rs 40. Sell a portion of the holding if the stock faces resistance at the target zone. Investors willing to take risk may use a trailing stop-loss in the event of a rally past the target zone.

Prajay Engineering (Rs 117): Hold with a stop-loss at Rs 101 as the stock appears to be headed towards Rs 145-Rs 150. The recent recovery from the low of Rs 57 appears to be the start of a new upward move. If this view is valid, the stock could have significant upside potential extending up to Rs 195-Rs 200. A close below Rs 101 would impart a prolonged bearish trend and could push the stock down to Rs 75-Rs 80.

Please let me have your views on Goetze India and Assam Company. — Sujatha

Goetze India (Rs 212): The short-term outlook appears weak and the share price could drop to Rs 185-Rs 190. There is no reason to take exposures in the stock at prevailing levels as the outlook does not appear bullish. Shareholders may hold with a stop-loss at Rs 210 and reduce exposures on rally.

Assam Company (Rs 22.5): The stock could move to Rs 27-Rs 28 in the short term. The view would be invalidated on a close below Rs 19.5. Hold with a stop-loss at Rs 19.5. Fresh exposures may also be considered on declines, by investors willing to take risk. Stop-loss for fresh exposures may be placed at the same level. Take partial profits once the stock moves to the target zone.

Way back in September 2005, when the Sensex was only around 7500, you had predicted that the index can move to10000 and the Nifty to 3000, which appeared very stiff targets then. Surprisingly, you maintained a positive long-term stance even during the great crash of October 2005 when the markets came crashing down from 8800 to 7500 and many experts were predicting that a new bear market had started. Now that we are somewhere close to your target, what, according to you, can happen beyond these levels? Will there be another correction similar to what we saw in October 2005 or can we expect a more severe correction in proportion to the entire bull market rise from May 2003? Or, would the rally past the target zone mark the end of the bull market? — V.V.Sundaram

The outlook for 2006 was featured in the edition dated January 1. There is no major change in that view. We foresee a significant correction that may extend up to 7500-7600 for the Sensex. From a long-term perspective, we are still in a major upward trend. The anticipated correction should be viewed as an opportunity to enhance exposures in the equity market. The long-term bullish outlook would be valid even if the market were to get into a much deeper correction than the expected fall to 7500-7600. We would not want to hazard a guess about the next major upside target before assessing the way the market unfolds over the next couple of months.

Kindly elaborate on the prospects of IVRCL Infrastructure and India Cements. — V.V. Sundaram

IVRCL Infrastructure (Rs 917): The share price has been on a sharp upward curve for over two years now. After a brief correction during August-October 2005, the stock appears to have commenced the next leg of the upward move. There appears to be significant upside potential from prevailing levels. A move to Rs 1,250-Rs 1,300 appears likely. Technically, there appears no reason for shareholders to reduce exposure at the moment. Fresh exposures may be considered at prevailing levels as well as on declines, with a stop-loss at Rs 840. Stop-loss for existing holding may also be placed at Rs 840.

India Cements (Rs 118): Remain invested with a stop-loss at Rs 105, as the outlook is positive. A move to Rs 145-Rs 150 appears likely. Fresh long positions may also be considered with a stop-loss at Rs 105. The positive outlook would be negated on a close below Rs 105.

What is outlook for Birla Ericsson bought at Rs 46? — Sumit & Umar Ahamed Manzoorahmed, Uttam Debnath

Birla Ericsson (Rs 36): There is a fair chance that you would get opportunities to exit at around Rs 51-Rs 52. This view would be negated on a close below Rs 32. Hold with a stop-loss at Rs 32. Use a trailing stop-loss in the event of a steady upward trend.

I want to buy Mahindra & Mahindra. Please let me know if I can do so at current levels or wait a drop. Please also let me know the medium- and long-term target for the stock? — Kunjna

Mahindra & Mahindra (Rs 525): The outlook is positive and a move to Rs 695-Rs 700 appears likely. Taking into account the long-term bullish outlook, it would be advisable to take exposures at prevailing levels. Price weakness may be used to enhance exposures. The positive outlook would be negated only on a close below Rs 440. As it would not be prudent from money management perspective, to have a stop-loss at Rs 440, investors may settle for Rs 490 as their stop-loss.

Will the overall market condition and sentiment have a bearing on the price target you suggest for various stocks? Is it possible for a stock to move up towards its target price even when the market is in a downtrend? — Abhayakumar Shah

More often than not, the overall market direction does have an impact on the price movement of almost all stocks. It does not, however, imply that the price target would not be achieved if the market trend turns bearish. Not all stocks need to fall in the same proportion as the broad market indices.

Though quite a few stocks would mimic the market trend, the degree of the move and the duration of the trend may differ between the stock concerned and the overall market. It may well turn out that the downtrend in a stock and the index may commence simultaneously but the stock could be in a short-term downtrend and the index in a medium-term one. In such a scenario, the stock would resume the uptrend well ahead of the index, as the downtrend in the latter is relatively prolonged. We would like to sum up by repeating that the price target mentioned would be met as long as the stop-loss is not taken out. This holds good irrespective of the overall market condition.

(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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