Market Strategy

Reliance Capital in bear's stranglehold

Lokeshwarri S.K. | Updated on August 13, 2011

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Please give the short- and long-term outlook on Bajaj Electricals bought at an average price of Rs 254.

Dr M. Ratnakar Shet

Bajaj Electricals (Rs 219.1): Bajaj Electricals was all fired up till October 2010 when it peaked at Rs 347. The stock is in a corrective mood over the last nine months that has retraced half the gains made by the stock in the run-up from Rs 27 to the October peak.

The stock will receive supports at Rs 187 and Rs 150 in the months ahead and investors can continue to hold the stock as long as it trades above Rs 150. Declines to this level can also be considered as an opportunity to accumulate the stock with stop at Rs 145.

The stock can however remain confined to the band between Rs 150 and Rs 350 for a few more months. Short-term investors can buy close to the lower end of the range and sell at the upper end. Long-term target on a break above Rs 350 is Rs 387 and then Rs 420.

Kindly give me the long-term prospects of Shree Renuka Sugars bought at Rs 240.

R.M. Kumarappan

Shree Renuka Sugars (Rs 70.1): Shree Renuka Sugars halted its unbridled run in January 2010 and has been trading in a broad range between Rs 50 and Rs 125 since then. The stock has significant support in the band between Rs 51 and Rs 60. It is currently attempting to hold above this zone. Investors can continue to hold the stock as long as it holds above this band.

But a close below Rs 50 can usher in a sharp decline to Rs 45 or Rs 31 in the medium-term. The stock will face resistance at Rs 80, Rs 100 or Rs 120 in the months ahead and investors with a shorter investment horizon can exit the stock at either of these levels. Long-term target on a break above Rs 124 is Rs 160.

Please advise me whether I should purchase Lanco Infratech at current level for reasonable long-term gains.

C.U. Prabhu, Shiju Remanan

Lanco Infratech (Rs 17.9): Lanco Infratech is dropping like a stone and the bottom is not yet in sight. It has also crashed past the key long-term support at Rs 35 in May. The stock has immediate supports at Rs 17 and then at Rs 10. Investors with a greater penchant for risk can catch this falling knife at the afore-mentioned supports.

Others with a lower risk appetite can stay off this stock since all technical indicators are pointing southwards at this juncture. Trends along all time-frames — long, medium and short are also down. Rallies will face resistance at Rs 45 and Rs 53 in the medium-term.

Fresh purchases are recommended on a strong weekly close above Rs 45. Once the stock gets past this hump, the stock can sail higher smoothly thereafter.

I want to know the future of Asian Electronics purchased at Rs 82 and Omaxe Ltd bought at Rs 375.

Mohan

Asian Electronics (Rs 9.5): Asian Electronics is also in a vertical decline that has retraced the entire gains made between 2003 and 2008. The stock is currently nearing its long-term trough recorded in March 2003. However, we cannot conclude that the slide can halt at this level, since the stock is not showing any semblance of reversal.

Decline to sub-Rs 10 is possible in the days ahead. It would be best to switch out of this stock at this point. Medium-term resistances would be at Rs 26, Rs 35 or Rs 51.

Fresh investments in this counter are recommended only if the stock goes on to close above the first resistance.

Omaxe (Rs 136.9): The long-term trend in Omaxe has not reversed higher following the battering received in 2008. However, the uptrend that began from March 2009 low continues to be strong.

That the stock hardly participated in the broader market correction that is taking place since last October is noteworthy. Omaxe is stuck in a very narrow band between Rs 120 and Rs 160 over the last ten months.

This kind of movement denotes strength and investors can hold the stock with stop at Rs 115.

Immediate target on a breach of Rs 155 is Rs 191.

The long-term view on the stock will, however, turn positive only on a close above Rs 260.

What is the price target of NMDC for the next 12 months?

Loganathan

NMDC (Rs 240.1): NMDC has long-term resistance in the zone between Rs 500 and Rs 570 where it formed significant peaks in the last quarter of 2007, May 2008 and January 2010. The stock moved in a downward trajectory through last year until it found support around Rs 250.

Investors can hold the stock as long as it trades above Rs 220. The zone between Rs 220 and Rs 250 is a critical long-term support for the stock. If this zone is penetrated, investors ought to exit the stock, since it can then decline to the region between Rs 120 and Rs 150.

Resistance for the next 12 months will be at Rs 360 and Rs 442. Investors with short- to medium-term horizon can book profit at either of these levels.

Kindly provide me advise on Reliance Capital.

Anil

Reliance Capital (Rs 575.4): Reliance Capital continues to be in doldrums as the stock has not really shaken off the bear's stranglehold.

It is constantly recording lower peaks and troughs since June 2009, and both the long- as well as the medium-term trends in the stock are currently down.

Immediate supports for the stock are at Rs 388 and then Rs 274. Investors can hold the stock with stop at Rs 380.

If the current short-term uptrend sustains, the stock can move higher to Rs 658 or Rs 853 in the months ahead where investors with shorter investment horizon can divest their holding.

Please share your short- and medium-term view on Raymond.

Geetika Manchanda

Raymond (379.6): The short-term trend in Raymond is up since the trough of Rs 276 recorded in February. The stock is, however, drawing close to key resistance at Rs 415. Since this level occurs at 61.8 per cent retracement of the previous down-move from April 2006 peak, investors need to tread warily as long as the stock hesitates below this level.

Some money can also be taken off the table by short-term investors if the stock continues to dither around this level. Stop-loss for short-term investors can be at Rs 345.

The medium-term trend in the stock continues to be up and it needs to close below Rs 210 to negate this trend.

Medium-term target on a close above Rs 450 is Rs 480 and then Rs 630.

Published on July 30, 2011

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