The Hindu Business Line : Query corner

Ultratech Cement (Rs 837.7): The sharp correction in Ultratech Cement witnessed since January 2007 has retraced more than 60 per cent of the long term up move that began in 2004. The stock has made a significant low at Rs 662. If this low holds, the stock can move higher to Rs 1,000 or Rs 1,200 over the next two years. Long-term investors can buy the stock with a stop at Rs 650.

The medium-term outlook for the stock is positive. The sideways move since April could be a precursor to a breakout to Rs 922 and then Rs 1,000. However, the stock will have trouble surpassing Rs 1,000 in the medium term. Medium term investors can buy at current levels with a stop at Rs 780.

Hero Honda (Rs 717.1): In our previous review of this stock in January 2007, we had given two interpretations for the move since June 2006. The first was that that it can be the second leg of the correction that started in May 2006. The second interpretation was that the move after June 2006 was a consolidation before the next upward move.

The slide since January 2007 points towards the first count being the right one. The targets for the C wave from the May 2006 peak are Rs 623 and then Rs 499. The stock is trying to move up from the first target. But a move past Rs 750 is required to mitigate the bearish outlook for the short-term. Medium term investors should buy the stock only on a close above Rs 750. Long-term investors should desist from taking an exposure to this stock at current levels as a slide to Rs 540 is on the cards.

I had purchased 120 shares of Hindalco at an average cost of Rs 165. I am willing to hold these shares for another one- to one-and-a-half years. Kindly comment on this stock's future considering that it is not performing well currently. T.P. Bhola

Hindalco (Rs 141): When we reviewed in February 2007 we had written that the a long-term low was possible in the band between Rs 120 and Rs 125 since the minimum target of the C wave from May 2006 peak was Rs 122 and long term support for the stock was present at Rs 125.

The stock has made a double bottom at Rs 125 and bounced from that level in March 2007. This trough is expected to hold over the long-term though the stock would meet stiff resistance at Rs 175 in its journey upwards. A firm close past Rs 175 is required to signal that the worst is over for Hindalco. Since long-term charts suggest that the stock price is not expected to fall below Rs 120, investors are advised to stay invested with a stop at Rs 118. There can be a rally to Rs 163 or Rs 168 over the next one year where investors with a shorter horizon can consider exit.

I bought Bajaj Electricals at the rate of Rs 503. Kindly inform me whether I should hold this stock or sell it at the present market rate. Arun

Bajaj Electricals (Rs 564.6): Bajaj Electricals made a peak at Rs 639 in April 2006. The stock has witnessed considerable volatility since then. Since it is nearing this peak again, short-term investors can book profits at this juncture and consider re-entry around Rs 400. The long-term outlook for this stock remains positive though it is expected to stay in the range between Rs 400 and Rs 650 over the medium term.

Sharp India purchased at Rs 25 seems to have broken out from the range between Rs 25 to Rs 38. Technically what are the support levels? Hitachi Home purchased at Rs 38 has broken out from Rs 80 levels to Rs 113. Is it good to book profits at these levels? Chokalingam Srinivasan

Sharp India (Rs 32.9): Sharp India has been oscillating sideways between Rs 18 and Rs 40 since August 2005. Since the stock is approaching the upper boundary of this range, it will be prudent to book profits around Rs 40. Fresh positions can be initiated if the stock crosses Rs 45 successfully. The subsequent target would be Rs 52.

Hitachi Home and Life Solutions India (Rs 106.7): This stock has reversed twice from the resistance that exists at Rs 120, since September 2005. As the stock is approaching this level again, you can book profits. The other option would be to hold the stock with a stop at Rs 100.

Please tell me target price with a medium-term timeframe for Finolex Industries and Bell Ceramics purchased at Rs 80 and Rs 42, respectively. M. Yunus

Finolex Industries (Rs 81.7): The movement in Finolex Industries since 2001 can be encased in to an upward moving channel. The stock is currently reversing from the lower boundary of this trend channel and could move towards the upper boundary of this channel that gives it a medium term target of Rs 110. Intermittent resistance would be experienced at Rs 89 and then Rs 95. Hold with a stop at Rs 70.

Bell Ceramics (Rs 12.1): This stock is weak along all time frames. Since the long-term support at Rs 19 has also been breached, we advise exiting from this position at current levels. The stock is poised to move below Rs 10.

Kindly let me know the prospects of Shreyas Shipping. Sivanandam

Shreyas Shipping (Rs 122.7): Shreyas Shipping is currently in a long-term bear phase. Though, the medium term trend in the stock is up, we expect the current up-move to face resistance from the zones around Rs 140 and then around Rs 160. Long-term investors should contemplate buying this stock only if it closes above Rs 160.

I have purchased Gujarat Alkalies at Rs 154 per share and Cipla at Rs 217 per share. Please give the outlook for these stocks with a three to six-months perspective. Jayasathya Ganesan

Gujarat Alkalies (Rs 153.7): Gujarat Alkalies is reversing from the long-term support zone that exists between Rs 100 and Rs 110. A short-term rally is underway since the trough at Rs 107 formed in March 2007. This nascent rally will not be threatened unless the stock price dips below Rs 130. Short-term investors can hold the stock with a stop at Rs 128. Investors with a longer time frame can keep a deeper stop at Rs 98. The stock could move higher to Rs 160 and then Rs 178 in the immediate future but it could struggle to rally past Rs 192 over the next one year.

Cipla (Rs 224.2): In our previous review of Cipla in November 2006, we had written that the stock was weak in both short and medium term. We had expected a dip to Rs 240. Though the stock did try to stabilise in the band between Rs 240 and Rs 260, the next leg has taken the stock down to its long-term support at Rs 210. The stock is not expected to lose further ground from this level and we can have a significant trough forming here. Though intermediate resistance would be experienced at Rs 245 and then at Rs 260, the stock could move to a new high over the next couple of years. Hold with a stop at Rs 200. If the stop loss gets hit, look for re-entry around Rs 175.

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, Chennai 600002.

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

Lokeshwarri S.K.

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