The Hindu Business Line : Query Corner

Himachal Futuristic Communications (Rs 14.9): Himachal Futuristic Communications has done nothing since 2005; moving in a band between Rs 15 and Rs 30. Move above the upper boundary of this trading range has resulted in sharp spikes followed by equally sharp corrections.

Such moves were observed in April 2006 and then in December 2007. This stock is a traders’ favourite due to its penchant to make sharp vertical ascents, but the fact that it always surges in the final stages of a bull market implies that this is one stock that investors ought to avoid.

The stock is currently trying to rally from its long-term support at Rs 15.

Averaging at this level is not advisable. A rally to Rs 20 or Rs 23 is possible over the next six months when investors can pare positions.

Recommended stop loss is at Rs 12.

I hold shares of Finolex Cables purchased at Rs 110 and Kolte Patil at Rs 234. Please let me know the future prospects of these shares. G Ravichnadran

Finolex Cables (Rs 51.4): This stock has been in a steep correction since the January peak at Rs 133. This correction has brought the long-term up-trend that began at 2003 to an end.

The penetration of the long-term trend line and the decline below the key long-term support at Rs 60 does not bode well for the stock. Finolex Cables is currently trying to stabilise around the June 2006 trough at Rs 44. It reversed from this level in November 2005 too.

Hold the stock with a stop at Rs 40. If this up swing sustains, the stock could move higher to Rs 65 or Rs 78 over the next three months.

The medium-term outlook will however turn positive only if the stock closes above the second resistance.

Investors with a medium-term perspective should divest their holdings at either of these levels.

Kolte Patil Developers (Rs 58.9): This stock is currently poised close to its life-time low at Rs 45.

The decline in the stock since the last week of May has eroded 67 per cent of the stock price. It is hard to envisage a move back to its all-time high at Rs 272 anytime soon.

However there can be medium term rallies to Rs 75 or Rs 100 that can be utilized by investors to reduce their position in the stock.

The medium-term view will turn positive only on a weekly close above Rs 134.

I hold shares in Indian Overseas Bank purchased at Rs 220. Please advise whether I should hold these shares or book loss. K M Kathiresan

Indian Overseas Bank (Rs 78.8): Indian Overseas Bank has been spiralling lower along with the rest of its peer in the banking sector. The decline has been especially devastating over the last two months as the stock moved from Rs 154 to the trough at Rs 69.7 in this period.

The positive aspect in the long-term chart is that the stock is pausing at the key long-term support band between Rs 70 and Rs 80.

The long-term view will turn overtly negative only on two consecutive weekly closes below this level.

On the other hand, a reversal from this zone can start a medium-term up-trend that can take the stock higher to Rs 103 or Rs 120.

Investors with a short investment horizon can exit at either of these levels. We do not envisage a move beyond Rs 155 in this stock over the next year.

I am holding some shares in BL Kashyap purchased at Rs 1,900. Should I sell the shares at loss or buy more of these shares. N S Ganesan

BL Kashyap and Sons (Rs 990.2): Though BL Kashyap and Sons has declined sharply from the peak formed in January, it is halting at the key long-term support at Rs 980.

The long-term trend line positioned lower at Rs 820 will support any further decline in the stock price.

Long-term investors can hold the stock as long as it sustains above Rs 820.

However a race back to your cost price seems difficult over the next year.

A sideways move between Rs 1,000 and Rs 1,600 is more likely in this period.

Short-term investors can exit the stock in rallies to Rs 1,350 or Rs 1,600.

I have purchased shares in Bank of Rajasthan at Rs 10. What is the technical outlook for this stock? C A Khomne

Bank of Rajasthan (Rs 77.7): Bank of Rajasthan is currently in a long-term bear market. It tried to reverse from the key support at Rs 90 in April.

But the sell-off in June has dragged the stock conclusively below this level.

Since the next long-term support for the stock is at Rs 36, we recommend a switch from this stock at current levels.

A weekly close above Rs 90 is required to mitigate the bearish short-term outlook.

Kindly give your outlook for India Infoline purchased at Rs 1,000. Siva Balaji

India Infoline (Rs 669.8): India Infoline is in a strong long-term down-trend and is currently trading more than 20 per cent below its key long-term support at Rs 815. But the current short-term up trend from the trough at Rs 475 has the potential to take the stock higher to Rs 808 or Rs 1,063.

Hold the stock with a tight stop at Rs 475 and divest your holdings at either of these levels.

The stock has strong resistance at Rs 1,060 and it might be unable to surpass this level over the next six months.

If the stock manages to close above this resistance, the next target would be Rs 1,420. Conversely, a decline below Rs 475 will accelerate the down move, pulling the stock towards Rs 403 or even Rs 255.

I hold NOCIL bought at Rs 40 and Alstom Projects purchased at Rs 700. Please let me know the outlook for these stocks. Antara Mukherjee

NOCIL (Rs 20.7): This stock recorded a steady rally from a trough of Rs 4.9 in 2003 to Rs 68 this January. The fragility of this up-trend is brought home only when we view the speed with which it gave up 72 per cent of its value from the January peak in less than three months.

The stock is currently attempting to stabilize around the June 2006 trough at Rs 17. A reversal is possible here that takes the stock towards Rs 30 or Rs 37 over the next six months.

Investors with a short-term perspective should exit on rallies to these levels.

The stop loss ought to be at Rs 17. Once this level is breached, a return to its long-term base below Rs 10 is likely.

Alstom Projects (Rs 407.6): The spectacular run in Alstom Projects came to an end at Rs 1097 in December 2007 and the stock has been at the wrong end of the stick since then.

The long-term correction that began at this peak has resulted in the stock declining below the long-term trend line.

The nascent up-trend that began from the trough at Rs 310 can be taken seriously only if the stock records at least two weekly closes above Rs 620. Alstom Projects faces strong resistance in the band between Rs 570 and Rs 620. Failure to penetrate this band can make the stock move in the wide trading range between Rs 300 and Rs 600 for a few months.

Investors can hold the stock with a stop below the recent trough at Rs 300. If this level is breached, the next support for the stock is in the zone between Rs 200 and Rs 240.

Can I purchase Aban Offshore at current level? Prachi Deokar

Aban Offshore (Rs 2,836.4): Even Aban Offshore that had been the poster-boy of the last bull-market has not been able to escape the bear onslaught and the stock has already given up half the gains recorded since 2000.

The stock is rather delicately poised near the long-term support at Rs 2,500; which the trough formed in August 2007 and again in January this year.

The recovery from here is however not too convincing and a decline to the next long-term support at Rs 2,050 is possible before this down-trend is complete. Long-term investors can hold the stock as long as it holds above Rs 2,050.

As far as buying at this level is concerned, short to medium-term investors can do so, with a stop loss at Rs 2,380.

A rally to Rs 3,500 or Rs 4,250 is possible over the medium-term. But the stock is unlikely to move beyond the second resistance over the next six months.

Investors with a long-term perspective can accumulate the stock in the band between Rs 2,000 and Rs 2,500.

— Lokeshwarri S.K.

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