The Hindu Business Line : Query Corner

The spike to Rs 62 in the last quarter of 2007 would not be considered a break-out since the move was induced by the frenzy prevalent in the markets, in that period.

The sharp reversal that followed this peak is an ample proof that the stock remains shackled to the afore-mentioned trading range.

The lower peak formed in the first week of May implies that the stock can head lower towards its long-term trend line at Rs 32 over the next six months.

Investors with a long-term perspective can wait for a decline to the zone between Rs 30 and 35 to accumulate the stock. The subsequent long-term support is present at Rs 26. The long-term view will turn negative only if this level is penetrated.

Medium-term resistances are at Rs 49 and then Rs 52. Investors with a lower investment horizon can exit the stock at these levels.

What are the prospects of 3i Infotech? V Vijaykumar

3i Infotech (Rs 119.5): The structural bull market in this stock was fractured when it went into a tailspin to record a 52-week low at Rs 84. The pull-back rally from this trough has halted just below the long-term trend line and the intermediate-term resistance at Rs 135. This denotes that the down-move that commenced last May can continue to drag the stock lower towards its recent trough at Rs 84.

However the stock has a key long-term support at Rs 84 and the long-term view will be marred only on a decline below this level. Investors should accumulate 3i Infotech in the band between Rs 80 and Rs 100.

Though we do expect the stock to move above its previous peak at Rs 164 over the next two years, the stock could spend the next six months in the band between Rs 80 and Rs 130.

Could you please let me know the medium-term prospects of Lakshmi Machine Works and Jyoti Structures? Is it the right time to buy these stocks? Ajith Thottupurkal

Lakshmi Machine Works (Rs 1503.2): Lakshmi Machine Works formed a double top pattern in the year between December 2006 and December 2007 and is currently in a long-term correction. This move has resulted in the stock losing 66 per cent of its value since last December. The stock is halting at the key long term support at Rs 1370. Aggressive investors can buy at current levels with a tight stop at Rs 1,350. The medium-term resistances for the stock are at Rs 2,000 and then Rs 2,200.

Risk-averse investors should however wait for a close above Rs 2,350 before investing in this stock. Short-term patterns in the chart indicates that the stock could test the recent low at Rs 1,390 and even move lower towards the next long-term support at Rs 1,000.

Jyoti Structures (Rs 124.5): This stock is in a vicious correction since its January peak at Rs 328. The recent leg of the down-trend in May has taken the stock to the long-term support at Rs 120. Fresh purchases should be avoided on a decline below this support. Such a move would imply that the stock was sliding towards the next long-term support at Rs 59.

The near-term chart patterns are far from encouraging and there are no traces of strength visible from any aspect. Trying to bottom fish in this counter would be akin to catching falling knives since the decline could continue further. It would be prudent to wait for the stock to reverse and move above Rs 185 before buying this stock.

I was allotted shares of Rural Electrification Corporation Ltd at Rs 105 per share during its IPO. What are the medium to long-term prospects of the companies? Prasad

Rural Electrification Corporation (Rs 107.1): It would not be possible to give a long-term view on Rural Electrification Corporation due to its limited trading history. But the key medium-term support for the stock is present at Rs 105. A reversal from this level can make the stock rally higher towards Rs 126 or Rs 141 in the period.

But a move below Rs 105 would imply an impending move lower to Rs 92. Investors with a short investment horizon should hold the stock with a stop at Rs 105. Others can hold with a deeper stop at Rs 90.

I bought Elecon Engineering at Rs 320. What is your view on this stock? Is it advisable to buy more shares in these companies at current levels? Vikas

Elecon Engineering (Rs 125.1): The down-trend that commenced in December 2007 in Elecon Engineering is currently pausing at the key long-term support band between Rs 100 and Rs 125. Investors can hold the stock as long as this support zone holds.

But the short-term outlook for this stock is extremely weak. We do not advise accumulating the stock at these levels. It needs to close beyond Rs 150 to signal that it is on the road to recovery. Failure to do so would signal that the stock is moving lower towards Rs 95 and then Rs 66.

The medium-term resistance levels are at Rs 208 and then Rs 235.

I have bought Mcleod Russel India at Rs 65. Kindly advise me if I can hold the stock to book profit at higher levels or exit at current levels. S Krishnamoorthy

Mcleod Russel India (Rs 90.8): This stock has been moving higher since the October 2007 trough at Rs 50. But if we expand the picture, it is evident that Mcleod Russel is moving in a broad sideways range since 1997. The boundaries of this range are between Rs 50 and Rs 150. Sudden twists and turns can be expected as long as the stock remains within this range.

The point in favour at this juncture is that the stock has moved above the long-term down-trend line at Rs 85. Investors can hold the stock with a stop at Rs 82 and try to book profit in the zone between Rs 100 and Rs 150. Fresh purchases are recommended either close to Rs 50 or on a weekly close beyond Rs 150.

I have purchased Divis Lab at Rs 1,480. Please advise whether to hold or exit. H.S V Sastry

Divis Laboratories (Rs 1,481.5): The long-term view on Divis Laboratories is positive. The third leg of the structural bull market in this stock, ended at Rs 1,930 in April and the stock has launched a fairly significant correction since then. The possible reversal points for this correction are Rs 1,090 and then Rs 870. The stock is currently moving higher from the first support. Long- term investors can hold the stock as long as it stays above the first support.

The stop loss for medium-term investors can be slightly higher, at Rs 1,260. Chart patterns indicate that the stock could attempt to move on to its former high over the next year.

I hold Maruti Udyog bought at Rs 804. Please advice me on the futures of this stock. G Ganesan

Maruti Udyog (Rs 764.5): Our long-term view on Maruti Suzuki has not altered since the previous review in January this year. The stock completed one stretch of its structural bull phase in November 2007 and is currently correcting the entire up-move recorded in the four years preceding this peak. This correction can easily span two to three years during which Maruti Udyog can move between Rs 500 and Rs 1,300. The immediate long-term support for the stock is present at Rs 700, from where it reversed in June 2006 and a year later in June 2007. But a decline towards the next long-term support at Rs 500 cannot be ruled out during the course of this correction. Long-term investors should utilize a decline below Rs 700 to accumulate this stock.

The short-term outlook for Maruti Udyog is weak and the stock appears headed lower towards Rs 718 and then Rs 700. Resistances for the medium- term would be at Rs 834 and Rs 900. Investors with a shorter horizon can divest their holdings close to Rs 900.

— 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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