Query Corner: TCS in a strong structural uptrend

Please advise me on the long-term outlook for South Indian Bank. I purchased the share at Rs 18.

T.V.S. Sai

South Indian Bank (Rs 22.9): The long-term outlook for South Indian Bank is positive. The correction from the last quarter of 2010 that devastated many stocks has not affected this stock much.

The stock has displayed resilience by hanging on to the first long-term support at Rs 20. Continued movement in the band between Rs 20 and Rs 30 will retain the positive outlook for the long-term.

The stock then has the potential to break out to Rs 36 or Rs 45 over the long term. Investors can hold the stock as long as it trades above Rs 20. Subsequent supports are at Rs 17 and Rs 14.

Please advise on Godrej Industries and IndusInd Bank.

Priya Vaswani, Sanjay Vaswani

Godrej Industries (Rs 212.8): Godrej Industries has held well in the correction last year, outperforming the benchmark by losing just 11 per cent. The stock is moving in a broad range between Rs 150 and Rs 250 since June 2010.

Since this consolidation follows the up-move from the bear market trough formed in March 2009, the stock can move higher in the months ahead to Rs 273 or Rs 355.

You can hold the stock with stop at Rs 140.

The stock can also be accumulated in declines with the same stop.

The positive view will reverse only on close below Rs 120.

That said, it needs to be borne in mind that the stock has not yet shaken off the bear grip that began in December 2007.

It faces stiff resistance in the zone between Rs 250 and Rs 275. Any rally can stutter around this zone. Long-term view will turn overtly positive only if the stock goes on to close above Rs 330.

IndusInd Bank (Rs 298.6): In our review of IndusInd Bank last July, we had indicated that the stock was stuck in a sideways range between Rs 200 and Rs 300 over the medium-term.

The scene has not changed since then and the stock continues to trade in this range. Such sideways move is positive for the structural uptrend.

It will continue to face resistance around Rs 300. Once this level is crossed, subsequent targets are Rs 398 and Rs 505.

Investors should, however, hold the stock as long as it trades above Rs 200. Targets on breach below Rs 200 are Rs 168 and Rs 135.

I request you to advise me on Aurobindo Pharma bought at Rs 180.

R.M. Kumarappan

Aurobindo Pharma (Rs 120.3): Last time we had visited Aurobindo Pharma in this column was in September 2011.

We had written then that key long-term support that investors need to watch carefully is at Rs 118.

We had also written that supports on a decline below Rs 118 are at Rs 81 and Rs 72. Therefore, it will be best to divest your holdings on a decline below this buttress (Rs 118).

The stock declined below Rs 118 in November 2011 and went on to record the trough at Rs 80 in the same month. A nascent uptrend is currently underway but it can be taken seriously only if it goes on to close above Rs 155.

Investors with short- to medium-term perspective can divest their holding if the stock fails to move beyond this level.

Resistances above this level will be Rs 180 and Rs 202.

Can you tell the medium-term prospects of TCS bought at Rs 1,207?

Sridhar

TCS (Rs 1,168.1): There is no doubt that TCS is among those blue-chips that are in a strong structural uptrend. The correction in 2011 has scarcely dented the stock and it is currently poised just six per cent below its life-time high.

The correction in August last year ended at Rs 906. This is just below one-third retracement of the up-move from October 2008 lows. That is, the stock has completed the minimum retracement requirement for a long-term correction.

Key long-term supports are at Rs 900 and Rs 850. Investors can continue to hold the stock with stop at Rs 840.

The stock could spend few more months moving in the broad range between Rs 850 and Rs 1,250. Investors with short- to medium-term horizon can exit if it reverses lower from the zone between Rs 1,200 and Rs 1,250 again.

This sideways move will be construed as a halt before it breaks out higher to Rs 1,500 or Rs 1,900 over the long-term.

That said, the positive long-term view will be negated if it declines below Rs 840. A fall to Rs 730 or Rs 610 will be possible before it attempts to move higher again.

What is the outlook for Syndicate Bank?

D. Jayaprakash

Syndicate Bank (Rs 101): Syndicate Bank breached its long-term trend deciding level at Rs 85 in December to record the trough at Rs 67. But it has bounced back with equal alacrity and it is nudging Rs 100 currently.

We can assume that a significant trough has been formed at Rs 67. So, long-term investors can hang on to the stock with stop at Rs 65.

Upper targets for the medium-term are Rs 105, Rs 115 and Rs 127.

Investors who hold the stock with a short- to medium-term perspective can exit on reversal from these levels. Long-term view will turn positive only on a close above Rs 127.

Next target is the former peak at Rs 164. Short-term investors can hold the stock with stop at Rs 79.

I would like to buy the shares of Lovable Lingerie. Please advise me at what level can I enter.

K.V. Ramana Babu

Lovable Lingerie (Rs 422): Lovable Lingerie was among the stars of 2011 with a strong 165 per cent gain since its listing in April last year to the peak in September.

It has, however, succumbed to gravity since then and declined to Rs 278 by December.

A medium-term uptrend is in progress since this trough. This rally will face resistance at Rs 415, Rs 460 and Rs 500 in the months ahead.

Since the stock is already at the first resistance, it would be best to wait and see if the stock reverses from these levels.

It can be bought in declines with stop at Rs 270.

If it continues moving ahead, wait for weekly close above Rs 500 before buying into this stock. Next target beyond Rs 500 is Rs 637.

Could you please let me know the trend of Valecha Engineering bought at Rs 70?

Subodha K Satapathy B

Valecha Engineering (Rs 71.4): Long-term trend in Valecha Engineering is down. But the stock is attempting to reverse higher from the recent trough at Rs 42.

Investors can hold the stock as long as the stock trades above this level.

It will face resistance in the near-term at Rs 80 and then at Rs 115.

Investors with a short-term perspective can divest their holding if the stock is unable to get past either of these levels.

Medium-term view will turn positive only on a close above Rs 115. Subsequent targets are Rs 135 and Rs 155.

The recent uptrend is still in early stages. If it reverses below Rs 80, there is a possibility of the stock breaching the December trough to go on towards the March 2009 low at Rs 22.