The Hindu Business Line : Query Corner

Rashtriya Chemicals and Fertilisers (Rs 123.8): The short-term trend in RCF is down. The stock has reversed sharply from the recent peak at Rs 150.4 formed on January 7.

Near-term supports for the stock exist at Rs 107 and then at Rs 92. Investors should sell the stock if it falls below the second support level. There could be a short-term bounce to Rs 135 or Rs 150, where near-term investors can divest their holdings. The stock failing to move past Rs 135 would be a sign of impending weakness.

I hold shares of Indiabulls Financial Services, purchased at Rs 887. Could you tell me the short-term prospects of the same? Krishnadas Nair

Indiabulls Financial Services (Rs 821.4): This stock has recorded strong gains since July 2006. However, a medium-term down trend is currently in progress since the recent peak at Rs 1,030.

Indiabulls Financial Services will receive strong support from the zone between Rs 790 and Rs 820. The presence of the 50-day moving average at this juncture makes it important from a medium-term perspective. Short-term investors can hold the stock with a stop at Rs 790.

Reversal from this zone will ensure that the stock attains a new high soon.

Conversely, a fall below Rs 790 can drag the stock lower towards Rs 650. Investors with a longer horizon can stay invested as long as the stock holds above this level.

What is the outlook for GV Films and Spicejet? Do you recommend buy at current levels? Krishnamurthy

GV Films (Rs 10.9): GV Films attained the glorious highs of Rs 168 in March 2000, just before the dotcom bubble burst. The next significant rally in the stock occurred in August and September 2005, the time when all the small and mid-cap stocks went in to dizzy spiral upwards.

The stock moved up from Rs 7 to Rs 26 on that occasion. The recent rally from Rs 6.6 (December 2007) to Rs 13 (January 8) also coincides with a frenzied chase of small-cap stocks.

The inference from these facts is that the upward movement in this stock has more to do with a wide-spread demand for low-valued (in terms of market price) stocks that is unsustainable and the stock has a tendency to return to sub-Rs 10 levels once this demand abates. Risk-averse investors should stay away from such stocks.

Spicejet (Rs 81.9): Following a long-drawn consolidation between Rs 40 and Rs 65 between June 2006 and December 2007, Spicejet broke out in December 2007 and went on to record a peak at Rs 104. But the stock is currently witnessing profit booking that has dragged the stock lower.

The next support for the stock is present at Rs 68. You can utilise corrections to buy the stock with a stop at Rs 67. The long-term target for the stock is Rs 115.

I am holding shares of RPG Life Science at Rs 118. Kindly suggest whether I should hold the shares or sell them? Thomas

RPG Life Sciences (Rs 96.9): PG Life Sciences is in a severe bear market since March 2006. Most rallies since this peak have been met by bouts of profit booking and have been short-lived. The recent run-up witnessed since December 2007 too appears to be a bear market pullback. Investors with a near-term perspective can hold with a stop at Rs 90. Fall below this level will take the stock to the long-term support at Rs 78.

The stock has reversed thrice from the support band between Rs 75 and Rs 80 since June 2006.

So, long-term investors can hold the stock as long as this buttress remains un-penetrated.

What are the short-term prospects of Bosch Chassis Systems bought at Rs 476? G. RamaKrishna Bhat

Bosch Chassis Systems (Rs 390): Bosch Chassis Systems is in a medium-term up trend since November 2007. The sequence of higher peaks and troughs since then is a positive for the stock. The stock is currently halting at the support provided by the 50-day moving average line as well as the short-term trend line.

Short-term investors can hold the stock with a stop at Rs 385. The stock can move higher to Rs 470 or Rs 500 in the immediate-term. However, it needs to move beyond Rs 505 before the negative outlook for the long-term is mitigated.

I have bought RIIL at an average price of Rs 2,100 and Pochiraju Industries at Rs 27. Kindly advise whether I should retain them or sell them. N. Ramana Reddy

Reliance Industrial Infrastructure (Rs 2,271.4): RIIL failed to move past its all-time high peak at Rs 3,202 in its recent bounce and has recorded a lower peak. This is a negative signal as far as the short-term outlook is concerned.

The stock has near term support at Rs 2,200. If this level is breached, it can fall to Rs 1,825 or even Rs 1,500. Short-term investors can sell the stock at current levels. Investors with a longer perspective can hold with a stop at Rs 1,500.

Pochiraju Industries (Rs 43.4): The recent fall from the peak at Rs 64 in Pochiraju Industries has retraced 61.8 per cent of the gains made since November 2007.

In other words, the stock is halting above the key support at Rs 38.

You can sell the shares once this level is breached. The subsequent support for the stock is at Rs 35.

I am a long-term investor and hold Ambuja Cements purchased at Rs 130.7. Please advise the prospects of this share. Sumod P.P.

Ambuja Cement (Rs 131.9): Ambuja Cements is in a strong intermediate-term down trend since its December 2007 peak. This fall has wiped out half the gains made since the March 2007 trough at Rs 105.

The stock has also fallen below its long-term 200-day moving average. The immediate support for the stock exists at Rs 123. Investors with a short-term time frame can hold the stock as long as this level holds.

However, long-term investors should hold on to the stock with a deeper stop, below the March 2007 trough, at Rs 98.

The stock could consolidate sideways between Rs 100 and Rs 160 for a few years before resuming its long-term up trend.

I am holding Marico at Rs 81. Kindly advise whether I should hold this stock or sell it. Saravana Kumar

Marico (Rs 65.2): The strong long-term uptrend since 2003 recorded in Marico was marred by just one deep correction that in May 2006. The stock is currently in the third part of this long-term move.

Though the stock has been extremely volatile since the last week of December, the long-term outlook for the stock will stay positive till the stock holds above Rs 61.

Marico will face near term resistance at Rs 69 and then at Rs 72.5. The near-term outlook will turn positive only if the stock moves beyond the second resistance level. Fresh purchases can be initiated only if the stock price moves above Rs 72.5.

— Lokeshwarri S.K.

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