Kalindee Rail Nirman (Rs 89.05): This stock has almost halved from its month-ago value due to the sharp decline recorded since the second week of September.

Kalindee Rail Nirman appears to be headed towards the next support band on the long-term chart that exists between Rs 75 and Rs 85. Investors can hold the stock as long as it holds above Rs 75.

Near-term resistances exist at Rs 145 and then Rs 175. However medium-term outlook will turn positive only on a strong weekly close above Rs 235.

Please give the medium to long term technical view on BHEL and BEL. Devesh

BHEL (Rs 1,345.85): In our review of BHEL in February, we have expected the correction from the November 2007 peak to halt around Rs 1,700 and the long-term up-trend to resume from that level.

But the intensity of this market correction has ensured that even titans such as BHEL bite the dust.

This stock moved below the support at Rs 1,700 and formed a trough at Rs 1,340 in June this year. Since then, BHEL has been moving in a sideways band between Rs 1,340 and Rs 1,850.

The stock has thus far given back half the gains recorded since 2001.

The 61.8 per cent (Fibonacci retracement) of this structural up-move gives us the next long-term support at Rs 1,145.

Subsequent support exists at March 2007 trough at Rs 978 and then June 2006 trough at Rs 765. However the stock is quite likely to form a long-term trough in the band between Rs 900 and Rs 1,100.

Long-term investors can watch for a reversal from this zone to buy the stock.

Near term outlook will turn overtly negative on a close below Rs 1,330. Medium-term resistance would be encountered at Rs 1,750 and then Rs 1,920.

Investors with a shorter investment horizon can divest their holding at either of these levels. The stock is expected to rise to Rs 2,300 and towards its previous peak at Rs 2,910 over the long-term.

Bharat Electronics (Rs 759.70): This stock has been spiralling downwards without any respite since January. The rally in April was very tentative and short-lived and the stock has currently declined below the key long-term support at Rs 870.

There is a significant support band for the stock between Rs 680 and Rs 800. The stock vacillated in this band in the period between April and November 2005.

Long-term investors can hold the stock with a stop at Rs 650.

However, penetration of this level can lead to another leg of the down-trend that drags the stock lower to Rs 340. Medium-term investors should sell the stock on a decline below the recent trough at Rs 750.

Strong medium-term resistance would be encountered in the band between Rs 1,200 and Rs 1,300.

Some of the holdings can be divested if the stock struggles to surpass this level. Long term targets (if the stock holds above Rs 650) are Rs 1,620 and Rs 2,100.

What is your advise for short-term to medium-term investors, given the current market conditions. Do you advise selling the holdings and booking losses or to be in cash. Do you feel that market will decline further or this is the bottom? Subur Basha Sheikh

Short to medium-term investors who typically buy shares with the intention of holding them for less than a year will find it difficult to stay afloat in a downward trending market such as these.

This is so because investors in India generally buy stocks at a lower price with the intention of selling it at a higher price.

Stock prices need to move higher in a short span if investors with a shorter horizon have to make money.

If the stock price does not move higher or if it declines within the short/medium-term investor’s investment time-frame, the holdings would have to be sold with a loss.

Empirical evidence shows that 70 per cent of stocks participate in a bull phase while 90 per cent of the traded universe declines in bear markets.

In other words, it is highly probable that the stock you buy would trend lower in a bear market.

That is the reason it is not advised to buy with a short to medium term perspective in a bear market.

On the other hand, long-term investors ought to utilize such declines to add to their portfolio since stocks have a better chance of moving higher in a 2 to 5 year time-frame.

If investors are already holding a number of loss-making positions, it would be best to evaluate each stock individually and decide whether it has a potential to rally higher once the market reverses.

Fundamentally strong stocks can be held (since prices have already corrected considerably since January) while those with weaker fundamentals can be sold or switched.

Please refer to our index outlook section for the view on the market.

Aban Offshore (Rs 1,111.00): What does one do with a stock that more than halves in value in just four sessions and that too from a lofty price of Rs 2,000?

But that is precisely what Aban Offshore did, falling like a ton of bricks from the peak at Rs 2,505 on September 22 to Rs 885.

We had expected the correction from January peak at Rs 5,400 to halt at the key long-term support at Rs 2,040. But once this support was shattered, the down-move accelerated.

The immediate support band on the chart is in the band between Rs 1,000 and Rs 1,150. Next support is at the June 2006 trough at Rs 644 and then at Rs 509.

Medium-term investors can divest their holdings on a close below Rs 1,000 and try to accumulate the stock at lower levels.

Resistances for the medium term would be at Rs 2,050 and then Rs 2,750. Fresh investment is recommended in this counter only on a close above Rs 2,050.

Reliance Capital is also below the key long-term support of at Rs 1,135. A close above this level is needed to mitigate the bearish medium-term outlook.

The next significant support on the chart is the July trough at Rs 392 from where the fresh leg of the long-term up-trend began. Interim supports would be at Rs 730 and then Rs 560.

Investors with a medium-term perspective can hold the stock with a stop at Rs 730 and try to divest their holdings in rallies to Rs 1,040 or Rs 1,250.

Key resistance for the year ahead would be encountered between Rs 1,250 and Rs 1,450.

Reversal from here can make the stock oscillate in the band between Rs 700 and Rs 1,450 for a few months.

— Lokeshwarri S.K.

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