The Hindu Business Line : Query Corner: Bharti Airtel remains in structural uptrend

I have bought shares of Mahanagar Telephone Nigam Ltd (MTNL) at Rs 80. Should I hold for the long-term or exit at current level or buy more? Anuj Jain

MTNL (Rs 75): This stock recorded a life-time low of Rs 51 in October 2008. But the rally from this level has been far from satisfactory. The stock halted at Rs 124 in June and appears to have resumed its long-term down-trend since then. Investors can draw heart from the fact that the stock is holding above the strong support zone between Rs 60 and Rs 65. Long-term investors can hold as long as it trades above Rs 60.

We however do not recommend further addition to the current holding at this juncture since the stock could vacillate in the band between Rs 60 and Rs 125 for a few more months. Investors with a short and medium-term perspective can therefore exit the stock close to the upper end of this trading range.

Long-term targets on a break-out above Rs 125 are Rs 140 and Rs 160.

Can you please give your view on Bharti Airtel? Jeyanthi

Bharti Airtel (Rs 288.7): Bharti Airtel continues to be in a structural up-move and key long-term support, if we consider the 61.8 per cent Fibonacci retracement target, occurs at Rs 228. There is an interim support at Rs 300 that occurs half-way down the prior long-term up-trend. The stock is currently halting around this level. Long-term investors should accumulate the stock in the zone between Rs 230 and Rs 300 with a stop at Rs 220. The stock needs to close below Rs 220 to roil the positive long-term view.

That said the medium-term trend in the stock is down since the beginning of October. Rallies in the stock will face stiff resistance in the zone between Rs 360 and Rs 375 over the short-term. Inability to rally beyond this zone will imply an impending move lower to the long-term support at Rs 220. Medium-term targets on a move above Rs 375 are Rs 390 and Rs 415.

I would like to know your short-term view on Bank of India and PFC. Paresh Kapadia

Bank of India (Rs 388.9): In our review of Bank of India in April this year, we had given the long-term targets at Rs 290 and Rs 360 and had noted that a race to the previous peak was improbable over the next two years. The stock has surpassed our expectation by rallying to a new life-time high of Rs 474 in October this year.

However the speed of decline from the Rs 474 peak implies that the move beyond Rs 360 was unwarranted.

The short-term up-trend from the November low of Rs 316 will face resistance at Rs 395 and then Rs 415. Short-term investors can exit the stock on a failure to rise above the second resistance as it will signal an impending decline to Rs 330 or Rs 290 over the medium-term. The support zone between Rs 290 and Rs 300 should halt any decline over the medium-term. Stop loss for short-term investors can be at Rs 350.

Power Finance Corporation (Rs 251.3): Power Finance Corporation has been oscillating around the key intermediate-term resistance of Rs 220 since the second week of July. This shallow correction between Rs 200 and Rs 250 that is occurring after a 3-wave up move from the October 2008 low of Rs 85 will be construed a temporary halt in the intermediate-term uptrend before the stock breaks out higher towards Rs 300 or Rs 370 over the medium-term.

Short-term investors can therefore hold the stock with a stop at Rs 200.

The stock can also be bought in declines with the same stop. Short-term targets on a move above Rs 250 are Rs 282 and then Rs 300.

I am holding shares of Walchandnagar Industries purchased at Rs 227. What to do with the stock - Hold for long-term or exit now? Mukesh Patel

Walchandnagar Industries (Rs 205.6): This stock has been walloped out of shape in the crash of 2008 as it crashed 94 per cent from its peak of Rs 1,205. The recovery since March has not been strong enough to lift the stock out of its long-term down-trend. Weekly close above Rs 320 would be the first signal that the stock is moving to a position of relative safety.

The stock is currently struggling to move past the intermediate-term resistance at Rs 220. Medium-term chart pattern is however positive and signals a likely break-out higher to Rs 315 or Rs 350 over the medium-term. You can hold the stock with a stop at Rs 175. Decline below this level will mean an impending decline to Rs 140 over the medium-term.

Can you tell me the prospects for Sterling Biotech bought at Rs 120 and Mercator Lines bought at Rs 66? Diwakar

Sterling Biotech (Rs 93.5): It is very rare to spot a chart akin to Sterling Biotech. This stock is making fresh multi-year lows when even the most unsought stock has doubled in value since March.

The trends along all time-frames, long, medium and short are down in the stock. It however has strong long-term support in the band between Rs 80 and Rs 90 and the stock is currently pausing above this zone.

Investors should however divest their holdings once the stock declines below Rs 80 since the next support is at Rs 51. Medium-term resistances are at Rs 102 and Rs 110.

Mercator Lines (Rs 62.3): Mercator Lines has been moving in a range between Rs 40 and Rs 75 since the first week of June. As long as the stock holds above the lower boundary of this range, there is a possibility of the stock breaking out higher to 84 or Rs 105 over the medium-term. However decline below Rs 40 would mean that the stock would re-test its March low of Rs 21.

I hold shares of KSB Pumps purchased at Rs 440. Please give your outlook on this stock and let me know if I can recoup my cost price. Thirukkumaran N

KSB Pumps (Rs 356.1): The intermediate-term up-trend that began from the March lows in KSB Pumps continues to be in place. The sideways move between Rs 350 and Rs 450 appears to be a consolidation before the up-trend resumes taking the stock towards its former peak of Rs 679. Investors should therefore hold the stock with a stop at Rs 340. Decline below Rs 340 would mean that the stock is heading towards the next support levels at Rs 318 and Rs 285.

I have got shares of Automotive Axels bought at Rs 575. Can you please let me know the future outlook of this stock? Arindam Malakar

Automotive Axels (Rs 302): This stock faces key intermediate-term resistance in the band between Rs 320 and Rs 360. Some profit can be booked by investors if the stock struggles to move beyond this zone.

Supports for the medium-term are at Rs 226 and Rs 168. Investors can hold the stock as long as it trades above the second support. The stock can rise to Rs 450 or Rs 538 over the next 12 months.

— Lokeshwarri S.K

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