The Hindu Business Line : Query corner

Please advice on the prospects of Thermax and Praj Industries. I wish to buy these stocks with a long-term perspective. Gangadhar Mani, Madhu Gupta

Thermax (Rs 525.5): Thermax has been moving in a downward trajectory over the last five months. This correction can be classified as a long-term one since it has already retraced half the gains made since 2001.

The stock bounced off the key support at Rs 478 in March 2008. A significant trough could have been formed at that level. If the stock declines below Rs 500, the next support is at Rs 380.

Investors with a long-term perspective can buy the stock in the band between Rs 450 and Rs 500 since it is difficult to buy the stock close to its bottom.

The stock will face resistance from the band between Rs 650 and Rs 700 over the next three months. Risk-averse investors can wait for a move above Rs 700 before buying the stock.

Praj Industries (Rs 132.2): Praj Industries too is currently undergoing a long-term correction. The stock is currently halting at the key long-term support at Rs 100. There is a strong support band just below, between Rs 80 and Rs 100 where the stock consolidated between May and December 2006.

Investors can accumulate the stock in the zone between Rs 80 and Rs 120.

The resistance levels for the next year would be at Rs 190 and then at Rs 210. Investors with a shorter horizon can exit the stock at either of these levels.

I have purchased shares of Mercator Lines at Rs178. Kindly advice whether I should hold these shares or book loss. Pattabhi

Mercator Lines (Rs 75.7): You have purchased the stock close to its all-time high at Rs 185.

The stock declined almost 70 per cent from this peak when it recorded the recent trough at Rs 56. Mercator Lines is currently hovering around the key long-term support at Rs 68.

A recovery from these levels will take the stock towards the intermediate-term targets at Rs 92 and then Rs 106. However a rally above the resistance band between Rs 90 and Rs 105 could be difficult over the next three months. You can offload your holdings in this zone.

Hold the stock until then with a stop at Rs 65.

Please tell me the future prospects of Indiabulls Financial. Can I buy the stock at current level? K. Sayinath

Indiabulls Financial Services (Rs 442.1): Although the long-term trend in Indiabulls Financial Services is down, the stock is attempting a rally from a key support band between Rs 400 and 450.

This move can take the stock towards Rs 600. Investors with a short-term horizon can buy the stock with a stop at Rs 390.

However long-term investors should wait for a move above Rs 600 before buying the stock since it can stay within the range between Rs 400 and Rs 600 for a few months before moving higher.

I have purchased Kpit Cummins at Rs 132. Kindly advise whether I should hold these shares or sell. K. Meenakshi

Kpit Cummins Infosystems (Rs 77.5): Kpit Cummins Infosystems was cruising along steadily since 2002. But this structural up-move was fractured last October.

The bear market pullback in November 2007 reversed lower from the long-term trend line as the stock unfurled the third leg of this correction.

The stock is currently attempting to steady itself above the long-term support at Rs 70.

The next level of support is at Rs 54; that can be called the final bastion.

Long-term investors can stay invested as long as the stock holds above this level (Rs 54).

The current short-term up move from the recent trough at Rs 59 can have legs that take the price higher to Rs 105 or Rs 110.

It is difficult to envisage a movement above these barriers over the next three months.

Short-term investors can offload some of their holdings in this band (Rs 100-110).

Kindly let me know the future prospects of Bongaigaon Refinery bought at Rs 98. Arun Gupta

Bongaigaon Refinery (Rs 50.5): This stock has a long-term ceiling in the band between Rs 90 and Rs 100. It has reversed from this zone in 2004, 2005 and more recently, in late 2007.

A reversal from this zone is followed by a crash to the lower boundary of its long-term band at Rs 40. Since the stock is close to this support, you can hold the stock.

Though we do not envisage a rally to Rs 100 over the next one year, it might reach there again sometime over the next five years.

Intermediate-term rallies that take the stock price to Rs 73 or Rs 90 can be utilized to pare positions.

I would like to know the short and medium-term prospects of Punj Lloyd and Rajesh Exports. M.Venkoba Rao, Vivek Abbi

Punj Lloyd (Rs 307): In our previous review of this stock in October 2007, we had expected it to surpass Rs 500 over the long-term.

Punj Lloyd did that in less than three months to record a lifetime high at Rs 589 in January.

But Punj Lloyd has lost about 50 per cent from this peak in the correction that has engulfed the Indian markets since the beginning of this year.

The stock has key long-term support at Rs 300. The presence of the long-term trend line at this level makes it an important determinant of the long-term trend.

The stock is currently halting above this level. It could move in the range between Rs 300 and Rs 400 for 3 months or so as the stock builds a base to launch its next move higher.

But we expect Punj Lloyd to move above its previous peak at Rs 589 over the next two years.

Long-term investors can hold the stock with a stop at Rs 280.

If it moves below Rs 300, the area between Rs 220 and Rs 250 would be an ideal band where long-term investors can accumulate the stock.

Rajesh Exports (Rs 78.2): Rajesh exports formed a classic triple top between September 2007 and January 2008 and followed it by a sharp decline in the ensuing two months.

The long-term outlook for the stock will turn explicitly negative only if it declines below Rs 68.

A reversal from these levels can take the stock price higher to Rs 106 or Rs 120.

But the stock is unlikely to make headway beyond Rs 120 since the race to Rs 165 in September 2007 was spurred by the bull market frenzy.

The peak at Rs 165 might not be re tested at least over the next one year.

I am holding Tata Chemicals purchased at Rs 225 and Cipla at Rs 208. Please advise which of these ought to be held for the long term and which need to be disposed of. M. Ramesh Chandu

Tata Chemicals (Rs 299.2): Tata Chemicals remains in a structural bull market despite the steep correction witnessed this year. The stock is close to the long-term support band between Rs 230 and Rs 250.

Though the stock could move lower towards Rs 230, long-term investors should continue to hold the stock.

The stock could be a steady gainer over the long-term and move upward once again towards Rs 400 over the next two years.

Cipla (Rs 213.8): Cipla has been undergoing a long-term correction since April 2006.

This correction has made the stock retrace 50 per cent of the gains made since 2003. It is not advisable for long-term investors to divest their holdings at this juncture since the stock is currently in an intermediate term up-trend. This move has the targets of Rs 220 and then Rs 250.

Investors with a shorter horizon can exit if the stock reverses from either of these levels.

Long-term investors can hold the stock with a stop at Rs 145. Cipla is likely to remain confined to the trading zone between Rs 150 and Rs 250 for a few months.

Long-term investors can accumulate the stock close to the lower boundary of this range.

I have bought shares of Marksans Pharma at Rs 220. Please give your outlook for this share. Vikram Doshi

Marksans Pharma (Rs 18.8): The stock of Marksans Pharma was split in to ten shares with a face value of Re 1 each this March. Your purchase price can therefore be deemed at Rs 22.

The recent correction in stock price has halted at Rs 15, which is a long-term support level.

You can hold the stock with a stop at Rs 15.

The up move that began from the Rs 15 level can propel the stock to Rs 23 or Rs 27 over the next three months. Divest your holdings if it fails to move past the first target. — Lokeshwarri S.K.

(Readers can send in their queries, on not more than two companies, to techtrail@thehindu.co.in. Queries can also be sent by post to: Tech Trail, 859/860 Kasturi Buildings, Anna Salai, Chennai 600002.

We would endeavour to answer as many queries as possible. However, constraints of space will limit the responses featured under this column.)

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