The Hindu Business Line : Query Corner

SRF (Rs 133.3): SRF is in a long-term down trend since the peak recorded at Rs 373 in April 2006. The long-term outlook is extremely weak. The stock has fallen below the long-term support at Rs 155. Selling pressure at every rise is thwarting a sustainable up-trend in the stock.

The medium-term trend outlook for the stock is neutral. It is moving sideways in a range between Rs 110 and Rs 180 over the last six months. Investors who do not propose to hold the stock for long-term can exit at current levels and consider re-entry once the stock moves above Rs 210. Long-term investors can hold the stock with a stop at Rs 105.

I hold Grasim shares bought at Rs 3,740. I want to hold the stock for long-term. What are the prospects of this company? Kannan Sanker

Grasim (Rs 3,503.3): Grasim Industries is in a strong structural bull market since 2003. Though the stock underwent a volatile period between April 2006 and March 2007, the long-term up trend has resumed from the March trough at Rs 1,930. Grasim has almost doubled in value from this low implying that this could be the third leg of a long-term bull market. The immediate support for the stock would be at Rs 3,240. Investors with a medium-term time frame can hold the stock with a stop at Rs 3,200.

Long-term investors should hold the stock with a stop at Rs 2,700. The stock has the potential to cross Rs 5,000 over the next two years.

What are the prospects of Shanthi Gears and Lloyd Electric and Engineering? Dr George Thomas

Shanthi Gears (Rs 84.3): Shanthi Gears is charting a long-term consolidation pattern since April 2006. Since this sideways move succeeds the strong run between 2003 and 2006 during which the stock yielded over eight-fold returns, it would be prudent to assume that the stock can continue in the upward trajectory once it moves beyond the upper boundary of the current range at Rs 92.

But the stock could spend a few more months oscillating in the range between Rs 60 and Rs 90 before it resumes the long-term up trend. Investors can buy the stock in the band between Rs 60 and Rs 65 with a long-term perspective. The stock can move towards Rs 120 over the next two years.

Lloyd Electric and Engineering (Rs 178.0): The weekly charts of Lloyd Electric and Shanthi Gears contain identical patterns. Lloyd Electric too rose from sub-Rs 10 levels in 2003 to Rs 235 by May 2006. The stock has been moving sideways since then in what appears to be a long-term consolidation phase that can be the forerunner for another up-move. The stock has been moving between Rs 120 and Rs 240 since the May 2006 crash. But the higher troughs recorded during this consolidation reflect the inherent strength in the stock.

Short-term investors can hold the stock with a stop at Rs 150 while long-term investors can hold with a deeper stop at Rs 100. The stock can move above Rs 250 over the next one year.

What is the future outlook for Cadila Healthcare purchased at Rs 302? Anbunathan

Cadila Healthcare (Rs 297.0): Cadila Healthcare faces strong resistance around Rs 400. Following a reversal from this level in April 2006, the stock plummeted to Rs 225 in the month that followed. Cadila Healthcare reversed lower from this level once again this June and has lost over 30 per cent since then.

The stock needs to rally above this resistance in a convincing manner before fresh purchases are made in the stock.

The short-term outlook for the stock is negative. It can fall lower to Rs 270 in the near- term.

This negative outlook will reverse only if the stock rallies above Rs 370. The immediate support for the stock exists at Rs 272 and then at Rs 210. Long-term investors can hold the stock with a stop at Rs 210.

I have 50 shares of Patni Computer and 100 shares of Shipping Corporation of India. What are the future prospects for these stocks? I am a short-term investor. Siva Kumar

Patni Computer Systems (Rs 327.2): The short-term trend in Patni Computers Systems is down since September 7. The vertical fall recorded by the stock has made it breach the key support at Rs 373. The stock can now fall lower to the long-term trend line at Rs 284 or the previous intermediate-term trough at Rs 251.

Short-term rallies will get arrested at Rs 405 or Rs 445. A move above the second resistance is required to make the intermediate-term outlook positive in this stock. Short-term investors can exit the stock at either of these levels. Stop loss for the short-term can be at Rs 280.

Shipping Corporation of India (Rs 224.4): The sharp down-move that commenced on October 26 in Shipping Corporation of India can halt in the support band between Rs 210 and Rs 220.

Short-term investors ought to hold the stock with a stop at Rs 200. A reversal from these levels can make the stock rally to Rs 235 or Rs 250 in the near term.

Investors with a long-term perspective can hold the stock with a stop at Rs 180.

Can you please let me know the prospects of TVS Motors and Hero Honda Motors for the next two months? Please let me know if I can enter at these levels. Srikanth

TVS Motor (Rs 55.6): TVS Motor might appear to be a great contrarian buy around Rs 50 given the fact that it was trading at Rs 180 a year back. But there ought to be a reason (or many reasons) why the stock is languishing more than 70 per cent below its all-time high while all the other front-line stocks are close to their record highs. Surely the stock price is trying to tell you something. Buying a stock based on a comparison of its current price with its previous price levels or its absolute value is not a prudent way to go about picking stocks.

TVS Motor is weak on the technical parameters too. The stock is below the long-term support at Rs 75.

Though there can be short-term rallies to Rs 67 or Rs 75, the stock could struggle to rally over Rs 75 over the next two months.

The current sideways move can be succeeded by a fall to Rs 40. The bearish outlook for the stock will be mitigated only if it rallies above Rs 87. Investing in TVS Motors at current levels is not recommended.

Hero Honda (Rs 662): The short-term outlook for Hero Honda too is bleak though the long-term outlook is relatively positive. The stock is heading towards the support around Rs 600 in the near-term.

You can buy the stock around Rs 600 with a stop at Rs 580 with a short-term perspective. A rally to Rs 680 or Rs 740 can be expected if the stock reverses from this level. The medium-term outlook is neutral.

We expect the stock to vacillate between Rs 600 and Rs 800 for a few more months.

Fall below Rs 550 will make the long-term outlook negative and the stock can then head towards Rs 450. — Lokeshwarri S.K.

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