The Hindu Business Line : Query Corner

Ashok Leyland (Rs 39.2): Ashok Leyland is charting a triangle pattern since May 2006. This could be a long-term consolidation phase before the stock embarks on its next long-term move. The lower boundary of this triangle, at Rs 34, is expected to lend support to the stock over the next one year. Shareholders can hold on to the stock as long as this support holds. However, a fall below Rs 34 can take the stock lower to Rs 28 where long-term investors can consider re-entry.

The immediate term outlook for the stock is, however, bleak. The rally that commenced from the October 17 trough appears to be a dead cat bounce and the stock could return to the support zone between Rs 34 and Rs 36 shortly. If you are a short-term investor, you can exit the stock at these levels and consider buying the stock again around Rs 34. Stop loss for the short-term ought to be at Rs 38.

Strides Arcolab (Rs 234.6): The long-term bull phase that began in 2001 is intact in Strides Arcolab. However, the stock is moving in a broad band between Rs 200 and Rs 450 since October 2005. Long term investors ought to hold the stock as long as the lower boundary of this long-term range (Rs 200) holds. The stock can move to Rs 450 again over the next two years.

But the short-term trend is extremely weak in this stock. It needs to rally above Rs 320 to turn the near-term outlook positive. Investors with a short term perspective can exit at current levels and consider re-entry once the stock moves above Rs 320.

I hold shares in Alembic. I bought it at Rs 82. Please comment on the technical prospects of this stock. Rahul Shinde

Alembic (Rs 102): Alembic moved beyond the long-term range that was confining the stock since May 2006, this October. The stock seems to have launched in to the third part of the long-term up trend that commenced in 2003. This part of the up-trend can make the stock rise to Rs 135 over the next one year. Hold on to your stocks with a stop at Rs 80. You can add to your positions if the stock moves towards this support.

I hold shares of Himatsingka Seide purchased at Rs 110 per share. What is the scope for further appreciation from here in the next 12 months? T. Raj Sehgal

Himatsingka Seide (Rs 104.5): The stock price of Himatsingka Seide witnessed a sharp run-up between September 2001 and May 2006. But the stock has made little progress after that; oscillating between Rs 80 and Rs 170. There is a strong support zone between Rs 90 and Rs 95. Long-term investors can hold the stock with a stop at Rs 90. We expect the stock to reverse above this support and head higher to the area between Rs 130 and Rs 138. But the upside in the stock could be capped around Rs 138 over the next 12 months. Investors with a short-term perspective can book profits in this area. Fresh purchases in this stock should be initiated only if the stock moves beyond Rs 138.

What is your view on Mid-day Multimedia purchased at Rs 57 and Chambal Fertilizers purchased at Rs 58? N. Venkateswaran

Mid-day Multimedia (Rs 39.6): In our previous review of this stock in April, we had written that the stock is not expected to move above the band between Rs 56 and Rs 66 over the next one year and short-term investors were advised to divest their holdings at these levels. The stock has reversed from the resistance at Rs 55 twice since then. However, the support that we had indicated, at Rs 32, has not been tested yet.

Our view on this stock is unaltered. Investors should exit this stock if it dips below Rs 32. Short-term rallies would be arrested under the resistance at Rs 65. The negative outlook will change only if the stock moves above Rs 65.

Chambal Fertilizers (Rs 48): Chambal Fertilizers broke-out of the long-term resistance at Rs 45 this August and went on to a record high at Rs 62.8. However, the sharp tumble that followed raises doubt regarding the sustainability of this long-term up-trend. Investors ought to stay wary until the stock rises above Rs 54. A reversal below this resistance can cause a fall to Rs 35. You can exit the stock at current levels and consider taking fresh position once the stock moves past Rs 54.

I have bought BPL at Rs 60 and TTML at Rs 44. Please give the outlook for these stocks. R. Mohan

BPL (Rs 44.8): The stock that captured the investors’ fancy in the heady days of 1999-2000 has been relegated to sub-Rs 100 levels over the past four years. However, looking at the past history of this stock is meaningless as those highs (Rs 636) were made possible due to the stock market bubble during that period. The stock might never re-visit those glorious highs again.

BPL recorded a high at Rs 104 in February 2007 and has been sliding down since then. The subsequent supports for the stock are present at Rs 32 and then at Rs 21. However, it would be advisable to switch from this stock given the bleak long-term outlook.

Tata Teleservices Maharashtra (Rs 43.9): It made a significant long-term low at Rs 17 in December 2006. The third leg of the long-term bull phase appears to have kicked off from this level. The minimum upward target for this leg of the up-move is Rs 51. The stock has almost achieved this target. However, on the log scale, the minimum long-term target for TTML would be Rs 100. Long-term investors can hold the stock with a stop at Rs 25. Investors with a shorter time frame can hold the stock with a stop at Rs 35. Fresh purchases for short-term can also be made with the same stop.

I have purchased Tata Tea at Rs 900 per share. Please let me know the long-term prospects of the company. Murthy

Tata Tea (Rs 799.3): The long-term prospects for Tata Tea are positive. The stock is in a structural bull-phase since 2001. However, one phase of this bull market ended in December 2005 and the stock has been moving sideways in a broad band between Rs 550 and Rs 1,000 since then. This correction has retraced 50 per cent of the move recorded since the 2001 trough. The long-term support for the stock is present at Rs 550; the stock has bounced from this level twice in the last two years. The long-term target for the stock is Rs 1,135. Since this target lies close to the upper boundary of the sideways band mentioned before, medium term investors ought to book profits as the stock reaches the zone between Rs 1,000 and Rs 1,100. Medium term investors can hold the stock as long as it remains above Rs 750.

I hold shares of HFCL. Kindly let me know the future prospects of the company. V.V. Swathi

Himachal Futuristic Communications (Rs 25.3): HFCL is another stock that is languishing in wilderness since the dot-com bubble burst. The intermediate term rallies in the stock are unable to take it above Rs 50. The stock has been moving sideways in the range between Rs 17 and Rs 34 since June 2006. Since the stock could spend a few more months moving in the same range, it would be best to switch from this stock at these levels.

— Lokeshwarri S.K.

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