The Hindu Business Line : Query Corner: Religare continues to be in down-trend

I am holding Entertainment Network India Ltd (ENIL) purchased at Rs 205. I wish to know how this stock is likely to act in the short-term. Subur Basha Shaikh.

ENIL (Rs 182.4): ENIL is currently in a corrective phase that is resulting in the stock moving sideways in the range between Rs 150 and Rs 270. A decline to the lower boundary is again likely in the near-term. If this level holds, the stock will move higher towards Rs 235 or Rs 270. Short-term investors can therefore hold as long as the stock trades above Rs 150.

I am holding UCO Bank purchased at Rs 45 and Adani Enterprises purchased at Rs 315. When would be the right time to book profits on these stocks? Rafat

UCO Bank (Rs 52.2): This stock is reversing lower from the peak of Rs 61.4 that is close to the key intermediate resistance of Rs 64. UCO

Bank needs to move beyond this level to signal the resumption of long-term trend that can pull the stock higher towards its previous life-time high peak of Rs 88.

If the current decline halts above Rs 45, it would mean that it can head higher once more to test the ceiling of Rs 61. Short-term investors can therefore hold with a stop at Rs 45 and book profit as the stock rallies above Rs 55. Supports below Rs 45 are at Rs 42 and Rs 37.

Adani Enterprises (Rs 826.2): Adani Enterprises faces strong resistance in the zone between Rs 850 and Rs 920. The stock reversed from this zone in July and has been moving sideways between Rs 630 and Rs 830 since then. The stock has strong support at Rs 630 and investors can hold this stock as long as it trades above this level.

Consolidation in the above mentioned zone will provide a strong platform from where the stock can move higher towards the long-term targets of Rs 1,300.

Investors can however divest part of their holding on a move below Rs 630 since that will signal an impending decline to Rs 560 or Rs 480.

I have purchased Electrosteel Castings at Rs 69 and KS Oils at Rs 93. Kindly let me know the prospects of these companies for medium to long-term. Jayanthi

Electrosteel Castings (Rs 41.1): Electrosteel Castings was bludgeoned out of shape in the bear market of 2008 and the stock lost 87 per cent from its January 2008 peak. It has not yet moved in to a position of safety despite the steep lift in April and May this year.

Key long-term resistance exists at Rs 47 and the stock will move to a position of relative safety only when it gets past this level. Inability to move past Rs 47 will cause a decline to Rs 33 or Rs 26 over the medium-term. Investors can hold the stock as long as it holds above Rs 25. Long-term targets on a move above Rs 47 are Rs 57 and Rs 68.

KS Oils (Rs 66.3): This stock too is struggling with the key medium-term resistance at Rs 72. KS Oils needs to move beyond this level to signal that the bear phase could be ending.

Conversely, decline from these levels can drag the stock to Rs 56 or even Rs 46 over the medium-term. Stop loss for investors can be at Rs 42.Fresh purchases are recommended only on a firm weekly close above Rs 72. Subsequent long-term targets are Rs 85 and Rs 98.

I would like to invest in Religare Enterprises and Balmer Lawrie and Company for the long-term. Please suggest the level where I should consider buying into these stocks. Ravish Kumar Ojha

Religare Enterprises (Rs 390.4): Religare Enterprises does not have sufficient history to enable us to take a long-term view on the stock. But its shenanigans since listing in November 2007 are far from comforting. It is definitely not a stock meant for the faint-hearted.

What is more, the stock continues to be in a down-trend. Immediate support for the stock is at Rs 350. If this level is breached there can be a decline to Rs 274.

Investors wishing to buy the stock from a long-term perspective can accumulate in declines with a tight stop at Rs 350. The upper ceiling for the next 12 months can however be at Rs 550.

Balmer Lawrie & Company (Rs 490.5): This stock is vacillating after retracing half the losses made since January 2008. Key intermediate-term resistances for the stock are at Rs 510 and Rs 580.

The stock is currently struggling around the first resistance and there is a likelihood of a decline to Rs 400 over the medium-term. Investors can accumulate the stock around this area with a stop at Rs 370. The outlook for the stock will get roiled only on a close below Rs 330.

Long-term target on a break above Rs 580 is Rs 720.

Please advise if I can purchase Reliance Power at current level or wait for some correction? Abid Husain Kanchawala

Reliance Power (Rs 143.9): Reliance Power has strong medium-term resistance at Rs 193 that occurs at 38.2 per cent retracement of the fall from February to October 2008.

The stock could not break past this level emphatically and reversed lower from the peak of Rs 210 in June 2009. This decline is however halting near the key short-term support of Rs 135. Investors with a greater penchant for risk can purchase the stock at current level with stop loss at Rs 130.Investors with a lower risk appetite can steer clear for a while since breach of the support at Rs 130 will imply that the March low of Rs 91 can be re-tested.

An alternate strategy would be to wait for a weekly close above Rs 210 to purchase the stock with the targets of Rs 230 and Rs 260.

I have recently purchased South Indian Bank at Rs 150. Please give your outlook for this stock. Karve S M

South Indian Bank (Rs 133.9): South Indian Bank is reversing lower from the peak of Rs 160 formed in October 2009. Since this top was formed at the key intermediate-term resistance, fresh investments are advised only on a strong close above this level.

The correction that is currently on can drag the stock down to Rs 114 or Rs 87 over the medium-term.

Short-term investors can hold the stock with a stop at Rs 124 while investors with a longer investment horizon can hold the stock as long as it trades above Rs 100. A strong move beyond Rs 160 is required to take the stock to its life-time high at Rs 228.

Kindly advise me on the prospects of Escorts. Dr Bharath Raja, Arthi P

Escorts (Rs 107.2): This is probably among the rare few stocks that have not made a new high in the bull market that lasted between 2003 and 2007. But there have been many towering peaks and deep valleys in the period since 1987 as the stock whipsawed in a very wide range between Rs 35 and Rs 250.

The rally from March lows failed to move beyond the intermediate-term resistance at Rs 120 and investors with a lower penchant for risk should exit the stock at these levels.

Once the decline begins, the stock can crash to Rs 70 or even Rs 35.

Suggested stop loss for the brave-hearts who wish to hold on to the stock is Rs 93.

— Lokeshwarri S.K.

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