The Hindu Business Line : Query Corner

Numeric Power Systems (Rs 534.9): This stock underwent an almost vertical rise between October 2007 and January 2008 that made the stock zoom from Rs 460 to Rs 1,200 in this period. It had an equally dramatic fall in the first three months of the year and is currently back to its long-term base between Rs 400 and Rs 500.

If we expand the time frame and consider the movement since 2002, the stock is currently pausing at the key support level at Rs 470. The long-term outlook for the chart will turn negative only if the trend-line that is poised lower at Rs 380 is breached.

Long-term investors can hold the stock with a stop at Rs 380. The stock will face resistance at Rs 620 and then Rs 695 over the next three months.

Investors with a medium-term horizon can exit the stock at either of these levels.

Please advise on Tata Teleservices Maharashtra purchased at Rs 30. Bharat Bhushan

Tata Teleservices Maharashtra (Rs 29.3): This stock is close to its key long-term support at Rs 27. Two weekly closes below this support, are required to make the long-term outlook negative. The stock could rally higher to Rs 40 or Rs 50 over the medium-term where investors with a shorter horizon can divest their holdings.

Please advise me on Hindustan Zinc purchased at Rs 816. Chaitanya Kumar Dondapati

Hindustan Zinc (Rs 536.4): Since the stock price of Hindustan Zinc is closely linked to the international zinc prices, it is necessary to consider the chart of zinc spot prices on London Metals Exchange (LME). Zinc prices on LME have been on a downswing since the second quarter of 2006. If we consider the one-year chart of the spot zinc prices, the current sideways move appears to be the precursor to another leg downward.

The stock of Hindustan Zinc has been reflecting the negative sentiment prevailing in global zinc prices by moving sideways between Rs 450 and Rs 1,100 over the last two years.

The intermediate-term trend in the stock reversed from the peak at Rs 970 formed in October 2007 and the stock is once more nearing its long-term support at Rs 450 where the 40-week moving average is poised.

Investors can hold the stock as long as this support holds. Another reversal from this zone will pull the stock higher towards Rs 730 or Rs 790 once more. The long-term ceiling is present at Rs 1,000.

I have bought English Indian Clay at Rs 1,415. Could you share some analysis about the stock’s future? Veerendra Kumar Sagar, Vasu Dev

English India Clay (Rs 1,077.1): This stock moved in to the limelight in December 2007 when it was trading at the price of Rs 140. English India Clay has also been among the trading favourites in 2008 yielding multi-fold returns in the journey from Rs 200 to Rs 2,000 this year. But the fall since March 17 has been equally abrupt, shaving off 50 per cent from its peak. The key near-term support is present at Rs 790.

A reversal from this level can make the stock rally once again towards its all-time high. But if this level is breached, the next halt could be at Rs 500. Exit the stock if it falls below Rs 790. Medium-term resistances are present at Rs 1,250 and then Rs 1,550.

Risk-averse investors ought to steer clear of this counter since the movement of the stock from one circuit to another, both on the way up as well as down implies a high level of trading interest.

What is the long and medium-term outlook for Canara Bank purchased at Rs 300? Should I hold or sell it? M. Venkoba Rao

Canara Bank (Rs 227.1): If we consider the long-term chart of Canara Bank, the stock has not done much since April 2005. It has been moving in a wide band between Rs 150 and Rs 300 in this period.

The spurt in the first week of January appears to be an aberration. This view is corroborated by the violent correction that ensued from the Rs 420 peak. The floor at Rs 150 has supported the stock thrice in this period. Long-term investors can hold with a stop below Rs 150 since the stock could reverse from here once more and move towards Rs 300 again.

The medium-term trend line at Rs 198 will provide support in the medium-term. The medium-term resistances are at Rs 285 and then Rs 340.

Please tell me the future prospects of MIC Electronics bought at Rs 1048. I am long-term investor. Murali

MIC Electronics (Rs 700.5): In our previous review of MIC Electronics in September 2007, we had expected the stock to move higher to Rs 660 or Rs 765 over the ensuing year.

The stock outdid our expectation and went on to record a peak at Rs 1,088 in December 2007. However, the stock has been correcting since the beginning of this year and is currently hovering above the medium-term trend line that is present at Rs 700. The next support for the stock would be at Rs 540. Investors with a longer-term horizon can hold the stock with a stop at Rs 530.

A reversal from this level can take the stock price higher to Rs 770 or Rs 900 over the medium-term. The likely range over the next one-year is between Rs 500 and Rs 1,000.

I have bought shares in stock of Sujana Towers at an average price of Rs 150 and Ahluwalia Contracts at an average price of Rs 250. Should I hold these stocks or book loss? S. Sankaran

Sujana Towers (Rs 1,17.2): This stock had a strong long-term support around Rs 130.

But this buttress was breached in March and the stock fell to the recent trough at Rs 84. It might now struggle to move past this ceiling (Rs 130) over the medium-term. Hold with a stop at Rs 80 and try to divest your holdings in the band between Rs 130 and Rs 140.

Ahluwalia Contracts (Rs 210.1): Ahluwalia Contracts has been in a downtrend since the January peak of Rs 393. This correction has eroded 55 per cent of the stock price from its lifetime high. The stock is currently halting just above the key long-term support at Rs 165. Investors can hold the stock as long as it stays above this level. A reversal from here would mean that the stock could rise to a new high over the long term.

The medium-term resistances for the stock would be at Rs 250 and then Rs 310. Fresh investments ought to be made in this stock only if it moves beyond the first resistance.

What should be the stop loss for GMR Infrastructure and Peninsula Land? Jayram

GMR Infrastructure (Rs 156.4): The stop-loss level for GMR Infrastructure should be at Rs 125, on a closing basis. That is, the stock should be divested the day after it closes below this level. This level was penetrated during the day on January 22 but it went on to close the session at Rs 158. If this level is breached, the next support is available at Rs 88.

Peninsula Land (Rs 93.6): The stop-loss for Peninsula Land can be at Rs 58. The stock is moving within a wide band between Rs 60 and Rs 150 since 2006. Reversal from this level can make the stock price rally towards the upper boundary of this trading range again.

— Lokeshwarri S.K.

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