The Hindu Business Line : Query Corner

Sterlite Industries (Rs 814.20): Sterlite Industries recorded a significant trough in June 2006 and has been recording steady gains since then, in line within an upward moving trend channel. The stock broke out of this trend channel in September, which implies that the subsequent move can be at a steeper gradient. Hold the stock with a stop at Rs 735 if you are a short-term investor and with a deeper stop at Rs 670, if you propose to hold the stock for at least six months. The stock has the potential to rally to the zone between Rs 900 and Rs 950 over the next one year.

Could you please give us the short-term view on FDC? Manju

FDC (Rs 31.00): FDC is in a structural down trend since late 2004. The sequence of lower peaks and troughs recorded over the last two years is extremely disconcerting. The sole positive factor is that the stock is halting at its long-term support at Rs 30. We recommend an exit from this stock if it falls below this support. Resistances in the short-term would be at Rs 35 and then at Rs 37. Investors should wait for a rally above the second resistance before initiating fresh purchases in this stock.

I have bought JK Paper at Rs 43 and Northgate Technology at Rs 720. Please give your outlook on these stocks. J. S. Sastry

JK Paper (Rs 38.90): JK Paper has moved close to the lower boundary of its long-term trading range that is present at Rs 34. As indicated in our previous review of this stock in January 2007, the stock has been moving in a broad band between Rs 40 and Rs 85 since 2000. Hold the stock with a stop at Rs 30. A reversal from here can take the stock to Rs 52. Partial profits can be booked as the stock nears Rs 50 since this is an important hurdle from the medium-term perspective.

Northgate Technology (Rs 675): Northgate Technologies is in a long-term up trend since June 2006. The intermittent corrections have been shallow, underlining the bullish sentiment prevailing towards this stock. Northgate Technologies has been in a medium-term downtrend since July and the correction is halting at key support at Rs 580. Investors with a medium-term perspective should hold the stock with a stop at Rs 580. Long-term investors can hold with a deeper stop at Rs 550.

We do not expect the stock to fall much below Rs 550 over the next one year. A correction to this level will provide the opportunity to investors for initiating fresh purchases in this stock. The stock has the potential to move to Rs 1,000 over the next one-year. This view will be negated only on a close below Rs 550.

Please let me have your views on Rain Calcining bought at Rs 45 for the short-term. J.J. Pinto

Rain Calcining (Rs 44): Rain Calcining bounced off the long-term trend line in April and has been making steady progress since then. The stock is, however, unable to surpass the near-term resistance band that exists between Rs 47 and Rs 51. Even if the stock gets past Rs 51, it would face a hurdle at the long-term resistance that exists in the zone between Rs 50 and Rs 55. The stock has been unable to surpass this level since July 2005, in spite of repeated attempts.

Investors with a short-term perspective should hold the stock with a stop at Rs 38 and divest their holdings around Rs 50. Long-term investors can hold with a stop at Rs 34 and try to exit the stock around Rs 55.

I hold Birla VXL shares bought at Rs 50. Kindly tell me whether I should sell the stock or hold it. Vasanth

Birla VXL (Rs 20.10): In our previous review of this stock in October 2006, we had expected the stock to find support at Rs 45. But the stock has breached this support too. Though Birla VXL is trying to stabilise itself since March, moving in a band between Rs 15 and Rs 25, this recovery is not very convincing and there is a risk of the stock falling to its long-term base between Rs 6 and Rs 12. We recommend an exit from this stock at current levels.

What are the prospects of Ennore Foundries bought at Rs 237? Is it prudent to hold it from a short-term perspective? Aditya Tiwari

Ennore Foundries (Rs 213.15): Ennore Foundries has gained over 50 per cent in the first five sessions of October. This rally was accompanied by a strong surge in volumes. Such steep rallies are normally interspersed with shallow corrections before the uptrend resumes. Ennore Foundries is currently undergoing one such correction. The immediate support for the stock is present at Rs 205 and then at Rs 195. Since you are concerned with the short-term perspective, hold with a stop at Rs 200. Resumption of the up-trend can take the stock towards Rs 300 and then Rs 380.

I have purchased the shares of Astra Microwave at Rs 219 per share. Should I continue to hold these shares? Selvaraj

Astra Microwave (Rs 133.50): This stock has been in the corrective mood since September 2005. This two-year old correction has retraced almost 61.8 per cent of the rally recorded since 2003. The long-term support at Rs 120 has been supporting the stock since early 2007. But the rallies have been arrested at the medium-term resistance at Rs 192. The stock can spend a few more months oscillating in the band between Rs 120 and Rs 190. A firm move beyond Rs 200 is needed to signal that the long-term trend is on the mend.

Investors with a shorter time frame can exit the stock close to Rs 200. Long-term investors can hold the stock with a stop at Rs 120.

Can I hold on to Teledata Informatics bought at Rs 65 in September? Jayan K. G.

Teledata Informatics (Rs 64.55): In our previous review of Teledata Informatics in December 2006, we had given the outer target for this stock at Rs 28. The stock has moved way past this target to record a peak at Rs 96 in April. But the chart patterns recorded in this stock since the beginning of 2007 emphatically denote that conservative investors should stay away from this stock.

The stock regularly hit the circuit filter in its journey from Rs 25 to Rs 95, luring in investors at higher and higher levels. The fall from Rs 95 to Rs 58 in May was equally dramatic as the stock moved from one lower circuit to the next. Unfortunately, volumes that increase with the increase in stock prices dry up once the stock starts crashing, closing all the exit routes for investors.

Teledata Informatics is oscillating between Rs 50 and Rs 75 since May. Investors ought to exit the stock as it nears the upper band of this range next time.

A move below Rs 50 can make the stock fall lower to Rs 43. Die-hard believers of this stock can hold with a stop at Rs 40.

What are the future prospects of Nagreeka Exports? Anusha

Nagreeka Exports (Rs 29.45): The near-term prospect for Nagreeka Exports is extremely bleak. It is unable to stage sustainable rallies and a slide lower to the zone between Rs 20 and Rs 25 is on the cards. The near-term resistance is present at Rs 50. A rally past Rs 50 is needed to make the short-term outlook positive. Investors are advised to switch from this stock. — Lokeshwarri S.K.

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