The Hindu Business Line : Query Corner

Himachal Futuristics (Rs 22.2): The stock had a dream run from Rs 18 to Rs 50 in the first few months of 2006. The May crash saw the stock price returning to Rs 18. It has been moving in a lower range between Rs 18 and Rs 30 since then. The long-term trend in this stock is down. The stock will have difficulty rising above Rs 38 over the next one year. Short-term resistance for the stock exists at Rs 25. Exit this stock if the price rallies to the Rs 25 level. Till then hold with a stop at Rs 18.

I bought Ruchira Papers at Rs 21, and Gulshan Sugars and Chemical at Rs 35. Can I hold or sell the stocks at current level? I am a long-term investor. Ram

Ruchira Papers (Rs 13.2): Since the stock was listed only in December 2006, we do not have sufficient data to do technical analysis on the stock. Rally beyond Rs 18 is required to indicate that the trend is reversing in this stock. You can exit at current levels and re-enter if the stock price closes above Rs 18.

Gulshan Sugars and Chemicals (Rs 25.9): All the long-term supports have been breached in this stock. The recovery in March has been extremely lacklustre. Short-term rallies will be unable to get past Rs 46 over the next six months. Exit the stock as it nears your cost price. Hold till then with a stop at Rs 20.

I bought B.A.G Films at Rs 22. I can hold this for the next six months. Please let me know the prospects of the company. Dinesh Kumar

B.A.G Films (Rs 29.4): The stock has been moving up sharply since December 2006. It has become one of the trading favourites in the last three months, moving upwards from one circuit filter to another. However, the lack of volumes is a concern. Once the stock price reverses, exit would be difficult since there would be buyers who tend to vanish when such stocks correct. Book some profits now and hold the rest with a stop just below your cost at Rs 22. Fall below Rs 22 can take the stock to a low of Rs 17. Re-entry can be contemplated if the price closes above Rs 32.

I am holding shares of Varun Shipping bought at Rs 78 in May 2006. Can you advise whether I should hold the stock or purchase more to average? Sanjay Negi

Varun Shipping (Rs 52): The scrip is in the process of correcting the entire rise that it has registered from the 2003 low. The stock has currently corrected more than 50 per cent of this long- term bull phase. The next long term support for the stock exists at Rs 43. We expect the stock to form a long term low around this support.

Since, you are a long-term investor, hold with a stop at Rs 42. You can make fresh purchases if the stock reverses from the support zone between Rs 45 and Rs 50 with the same stop. Resistance for the stock in the medium term will be at Rs 60, Rs 68 and then Rs 78. A rally past Rs 78 is required to signal that the long-term trend has turned up again.

I am holding 1,000 shares of IndusInd Bank at Rs 55 for the last six months. Should I exit or hold. Shaheed Reeza

IndusInd Bank (Rs 42): The long-term trend has reversed in IndusInd Bank from the peak of Rs 83 made in August 2005. The recovery in the stock price post-June 2006 retraced exactly 61.8 per cent of the fall from the August 2005 peak, leading us to infer that it was but a bear market pull-back. The third leg of this long-term bear phase has started from February 2007. The stock price can now head towards the zone between Rs 25 and Rs 27. Fall below this zone will take the stock to Rs 15. Exit at current levels. Re-enter if there is a firm close above Rs 50.

I had bought Saurashtra Cement at Rs 76 a few months ago. Can you please advise me if I should book loss, hold on or may be buy some more to average? I am open to holding these shares for another 6-9 months. Rajesh G. Wadhwa

Saurashtra Cement (Rs 43.6): In our last review of this stock in September 2006, we had written that the stock would face stiff resistance in the band between Rs 80 and Rs 85. We had recommended that short-term investors should exit in this zone. The stock made a triple top at Rs 85 between October and December 2006, and has been moving down ever since.

The short-term trend in the stock is extremely weak. The stock price needs to rally above Rs 67 before the medium term trend in this stock turns positive. Exit at current levels and re-enter if the stock closes above Rs 67. The slide in this stock can halt at the long-term support zone between Rs 35 and Rs 38.

Please give your medium term technical view for Prithvi Information Solutions bought at Rs 314. Kannan, Kiran Singh

Prithvi Information Solutions (Rs 266.3): The long term as well as the intermediate term trend is down in this stock. The recovery in Prithvi Information Solutions since August 2006 retraced exactly 61.8 per cent of the fall that it had recorded from the peak of Rs 503 recorded in May 2006. The immediate support lies at the August low of Rs 244.

Fall below this level can take the stock to the next target of Rs 141. Hold with a stop at Rs 240. Exit on any short-term rally that takes the stock towards your cost price. The stock can have difficulty clearing Rs 350 over the next six months.

I hold Uttam Galva Steel at Rs 42. Please tell me about the short- and medium-term prospects of the company. E. Murali

Uttam Galva Steel (Rs 30.9): This stock has recorded successive lower peaks and troughs since March 2005.

The long tem trend is down. The resistance for the medium term will be at Rs 43 and then Rs 50. The stock might not be able to rally above Rs 50 in the next one year.

Exit the stock on rallies. Till then, hold with a stop at Rs 22. The long-term support at Rs 32 has been breached. The next viable support would be the place where the stock halted in June 2006, at Rs 23.

Please advise me on the prospects of Gujarat Ambuja Cement. Bulan Sankan

Gujarat Ambuja Cement (Rs 106.7): The scrip has received a sharp set back in 2007 in tandem with the rest of its peers in the sector. Long-term charts suggest that the stock is currently correcting the move that began from March 2003 low. The price has retraced exactly 38.2 per cent of the gains recorded from March 2003 to January 2007. This is a long-term support and the slide can halt here.

However, the recovery so far does not look convincing. The stock would need to close above Rs 120 to assure investors that the short-term risk has been averted.

Fresh longs are recommended on a close above Rs 120. Subsequent targets are Rs 125 and then Rs 131.

I have bought Orient Paper at Rs 605 per share. Should I exit now, hold or average? S. Rangachari

Orient Paper (Rs 428): The stock has registered a very sharp cut in 2007. It has lost about 43 per cent from the peak of Rs 654 recorded in January 2007. A long-term correction is currently on in this stock.

The next long term support is at Rs 350. Fall below this level would take the stock to Rs 275. Since, there can be further down side in this stock, you can exit at current level and consider re-entry around Rs 275.

Conversely, if the stock starts rallying, re-enter on a firm close above Rs 500.

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