The Hindu Business Line : Query Corner

Ispat Industries climbed from around Rs 30 to Rs 75 earlier this year but is now struggling in the band between Rs 28 and Rs 31. I am holding shares purchased at Rs 72. What should I do now? Tejas Shah

Ispat Industries (Rs 32.9): In our previous review of Ispat Industries in December 2007, we had recommended booking partial profits at Rs 70 since the stock has formed several significant peaks in the band between Rs 85 and 100. We had also highlighted the risk associated with this stock in that column.

The stock has moved below the long-term support band between Rs 40 and 45. The tower formation in the stock between November 2007 and February 2008 denotes that the entire run-up in the last quarter of 2007 was instigated by the bullish fervour in the stock markets as a whole and had nothing to do with the intrinsic worth of the stock.

It can take a year or more for the stock to move beyond Rs 70 again.

You can hold the stock with a stop at Rs 25 and divest your holdings in short-term rallies to Rs 36 or Rs 42.

The zone around Rs 50 will be a strong resistance for the stock over the next six months.

Please advice if I should hold or sell HCL Technologies bought at Rs 237. Binu Tom

HCL Technologies (Rs 269.2): HCL Technologies is in a long-term up trend since the 2003 trough at Rs 58.

But one leg of this up trend has ended at the March 2006 peak of Rs 353 and the stock is moving in a wide band between Rs 220 and 350 since then.

The support at Rs 228 is a very significant one since it occurs at the 38.2 per cent retracement of the entire up-move from the 2003 trough. HCL Technologies has declined below this level twice – in June 2006 and then in January 2008, but on both occasions, the recovery has been very swift implying that buyers find the stock’s valuation lucrative once it moves below Rs 220.

The long-term supports below Rs 220 are at Rs 207 and then Rs 170.

But we expect the stock to remain in the zone between Rs 220 and Rs 350 in the medium-term before it breaks out higher to Rs 500 over the long-term.

Investors with a long term horizon should accumulate the stock in the band between Rs 200 and 220 with a stop at Rs 165.

Medium-term resistances would be at Rs 280 and then Rs 296.

Kindly let me know the future prospects ofVijaya Bank purchased at Rs 65 and IFCI at Rs 44. Narayana Reddy K

Vijaya Bank (Rs 54.1): Vijaya Bank has been moving in a broad range between Rs 35 and Rs 75 since 2004. Though the stock broke out beyond Rs 75 to record the peak at Rs 96.8 in January, the move would be termed a false break-out since this move was impelled by the final frenzied stages of the bull market.

The stock is currently halting just above the long-term trend line at Rs 46.

Long-term investors can hold the stock with a stop at Rs 32.

Move beyond Rs 56 is needed to avert another slide towards the long-term base between Rs 35 and Rs 38.

Medium-term resistances would be at Rs 65 and then Rs 77.

IFCI (Rs 50.4): No points for guessing that the long-term outlook in IFCI has turned extremely bleak.

In our review of this stock in December 2007, following the scrapping of the stake sale, we had recommended an exit between Rs 86 and Rs 97 as the stock was not likely to re-attain its previous peak at Rs 121.

The stop loss suggested for long-term investors was Rs 63.

The stock has since then recorded a trough at Rs 36.7 in March. There is a tentative rally currently in progress from this trough.

Any purchases made in the stock at this point should be from a short-term trading perspective only.

Long-term investors ought to steer clear of this counter.

The stock could move to Rs 54 or Rs 58 in the near-term where short-term investors can book profits and exit.

The key resistance zone from a medium- term perspective lies between Rs 70 and Rs 72.

The stock could struggle to overcome this barrier over the medium-term.

I have purchased shares of Chambal Fertilizers at Rs 58 and Mangalore Chemicals at Rs 38. What are the prospects for these shares? Should I hold them or exit? Kunal Gupta

Chambal Fertilizers (Rs 70.0): Chambal Fertilizers is advisable for only those investors with a great penchant for risk.

The sharp rally witnessed in this stock over the last two sessions corroborates this view.

Following the tumble in the earlier part of this year, the stock is currently moving up again.

The current explosive move has the immediate targets at Rs 74 and then Rs 84. We recommend booking partial profits as the stock moves above Rs 74 since exit routes are not available once this stock starts declining.

Mangalore Chemicals and Fertilizers (Rs 25.2): This stock has undergone a violent decline from the January peak at Rs 52 to the recent trough at Rs 15.

But it has started moving higher from the long-term trend line placed at Rs 16. This trend line has not been breached effectively since the structural bull market began in this stock in 2000.

Since the stock is currently close to this support level, long-term investors can hold on to the stock as long as it does not record two weekly closes below Rs 15.

However, a sharp rally back to its previous peak is not envisaged at this juncture. The stock would encounter resistance at Rs 25 and then from Rs 32 over the near-term.

A sideways move between Rs 15 and Rs 30 is highly likely for a few months before it makes an attempt to move higher towards Rs 40.

I hold shares of Orient Ceramics purchased at Rs 78 and BSEL Infra bought at Rs 88;both of which were bought in January before the market crash.I have lost more than 50 per cent of my investment. Please suggest whether I should hold these shares or exit. Tanya

Orient Ceramics (Rs 42.1): Despite the sharp decline in Orient Ceramics this year, investors can take heart from the fact that it is halting above the key long-term support at Rs 36.

The long-term outlook will turn negative only when this level is breached conclusively.

That said, the stock could find it difficult to rally above Rs 55 over the next six months.

Investors with a shorter horizon can exit the stock close to this level.

BSEL Infrastructure (Rs 45): This stock is reeling under severe selling pressure since the January peak at Rs 118. It has moved below the key long-term support at Rs 47.

The short-term chart patterns are not conducive.

We recommend a switch from this stock at current levels.

Kindly let me know the prospects of Jindal Steel & Power bought at Rs 1914 and Deccan Chronicle bought at Rs 182. Aruna Mohan

Jindal Steel and Power (Rs 2019.7): The structural bull phase that began from 2001 is still going strong in Jindal Steel and Power.

The positive long-term outlook will be threatened only if the stock price declines below Rs 1,000.

However, the stock is currently in a long-term correction that is retracing this six year old up-trend.

The trough made on March 24 at Rs 1,726 retraced 50 per cent of the long-term up trend and is a good place from where a reversal can take place.

The next long-term support is at the January 22 trough of Rs 1,305.

We do not foresee the stock declining below this level.

Investors can accumulate the stock the stock if it moves close to Rs 1,700.

Though it can spend a few more months in the band between Rs 1,700 and Rs 2,500, it is expected to move beyond its all-time high over the long-term.

Deccan Chronicle (Rs 150.4): Deccan Chronicle too is halting at the key support level around Rs 150.

But the reversal has not been convincing so far.

Move below this support can drag the stock price to Rs 118 over the medium term.

Investors with a short term perspective can hold the stock with a stop at Rs 130.

Those with a longer horizon can hold with a deeper stop at Rs 116.

Medium-term resistances would be at Rs 170 and then Rs 196. — Lokeshwarri S.K.

(Readers can send in their queries, on not more than two companies, totechtrail@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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