Query Corner: GAIL holding above vital support

Please let me have your take on GAIL (India) purchased at Rs 445. Shall I book loss or buy more at these levels?

Vimal Bhatia

GAIL (Rs 410.7): GAIL has been quite resilient in the recent bout of correction. It has managed to hold above the key long-term support at Rs 400 so far. If the stock shows strength above this level, it will mean that the long-term uptrend that began from March 2009 remains in place and the stock can go on to new life-time high after fluctuating in the band between Rs 400 and Rs 550 for a few more months. Long-term target in this scenario is Rs 620.

Investors with medium-term perspective should, however, divest their holding on a close below Rs 400. Subsequent targets are Rs 362 and Rs 322. The positive long-term outlook in this stock will be negated only on an emphatic weekly close below Rs 320. That can be the stop-loss for investors who are into this stock for the long haul.

I purchased Voltamp Transformers at Rs 944 and Punj Lloyd at Rs 215. What is the outlook for these stocks?

Hitesh Dumaswala

Voltamp Transformers (Rs 485): This stock could not charge past the first resistance at Rs 1,100 mentioned in our review of Voltamp Transformers in March last year. It peaked at Rs 1,135 in August and is slipping lower since then. The stock breached the key medium-term support at Rs 600 in March 2011 and continues to display weakness both in the short- and medium-term time-frame.

Continued movement below Rs 600 will imply that the stock is heading lower to the March 2009 low at Rs 265. Since the medium-term outlook is negative, investors can sell at current level and consider reinvestment on a close above Rs 900. Investors with greater risk-taking ability can hold with stop at Rs 450 and sell the stock in minor rallies to Rs 700 or Rs 875.

Punj Lloyd (Rs 53): Punj Lloyd continues in a vicious downtrend and is currently wallowing close to its life-time lows. We had expected strong support around the March 2009 trough at Rs 68 but the stock breached this level in February. Investors can, however, draw comfort from the fact that it is currently attempting to stabilise around this level, oscillating between Rs 54 and Rs 82 since February.

Investors with medium- and short-term perspective can hold the stock as long as it trades above Rs 50. If this level holds, there can be rallies to Rs 100 or Rs 120 where they can consider exit. Investors who bought the stock at higher levels can consider switching to some other stock since it could be while before the stock gathers strength to get past Rs 150.

I hold the shares of Provogue (India) bought at Rs 48 and MMTC bought at   Rs 1,715. Kindly advise me the short-term outlook for these stocks.

K. Kanagaraj

Provogue (Rs 27): Provogue's troubles don't seem to be nearing an end anywhere soon if the technical charts are taken in to consideration. The stock is currently trading close to its life-time lows. A significant trough was made by the stock at Rs 24.6 in November 2005, and then at Rs 26.3 in March 2009.

These supports will be keenly watched by investors in the days ahead. Drop below the 2005 trough can even pull the stock to sub-Rs 10 levels. Investors still holding the stock can, therefore, continue to do so only as long as it trades above Rs 24.6.

If this support holds, the stock could move on to Rs 60 or Rs 80 in the months ahead. Since the stock is vacillating in the trading band between Rs 26 and Rs 80 since 2009, the long-term view will turn positive only on strong weekly close above Rs 80. Investors with short- to medium-term perspective can buy at current levels with stop at Rs 24 to exit at the resistances mentioned above.

MMTC (Rs 675): MMTC is an extremely volatile stock that is not recommended for the faint-hearted. It soared from Rs 110 to Rs 2,845 in the second half of 2007 only to plummet to Rs 456 by December 2008. The recovery in 2009 stalled at Rs 1,975 and the stock is once again sliding furiously.

It breached the key medium-term support at Rs 1,040 in January this year, and the next support on the chart is at Rs 645 and then at the 2008 low of Rs 456. Investors with a short- to medium-term perspective can divest their holding at this juncture and consider re-entry once the stock moves above Rs 1,100.

Key resistances in the months ahead would be at Rs 1,172 and Rs 1,480. Long-term resistance is at Rs 2,000.

Can I buy and hold Tata Global Beverages for the long-term, and Godrej Industries for 3-6 months?

Kalyan

Tata Global Beverages (Rs 89.5): Long-term trend in Tata Global Beverages reversed higher from the November 2008 low of Rs 43. But this move has come to an end in October 2010 and the stock is once again in a serious correction. This correction can halt around Rs 80 and investors wishing to buy the stock can do so around this level with stop at Rs 75.

Reversal above Rs 80 will take the stock higher to Rs 143 or Rs 179 over the long-term. However, decline below Rs 75 will pull the stock lower to Rs 70 or Rs 53 in the ensuing months.

Godrej Industries (Rs 181.5): The bear phase that began in Godrej Industries from the January 2008 peak continues to be in force. The recovery since 2009 could not take the stock above the key long-term resistance at Rs 220 underlining the structural weakness. The stock needs to get past the resistance zone between Rs 220 and Rs 250 before the long-term trend turns positive.

That said, chart pattern in the weekly chart is that of a consolidation in the range of Rs 140 and Rs 240. Investors can hold the stock with stop at Rs 160. Those wishing to buy the stock can do so in declines with the same stop. If the stock manages to hold above Rs 160, it can move higher to Rs 285 or Rs 330 over the next couple of years.

I wish to purchase IVRCL at current levels. Please guide me on the long- and medium-term prospects of the share.

C.U. Prabhu

IVRCL (Rs 32.1): IVRCL is indeed at basement prices, close to its life-time low of Rs 28.5 recorded in October 2008. The short-, medium- as well as the long-term trends in this stock are currently down. All the indicators are pointing downward and there is a risk of the stock breaking below its previous low.

It would be best to wait for signs of reversal before investing in the stock since buying it at current levels would be akin to catching a falling knife. Investors with a lower risk appetite can wait for a close above Rs 100 before investing, while those with a greater penchant for risk can buy at current levels with stop at Rs 27.

Reversal from these levels can take the stock higher to Rs 140 or Rs 207 over the next couple of years. It is, however, difficult to see a close above Rs 200 in the foreseeable future.

COMMENT NOW