I have shares of Federal Bank. My average purchase price is ₹71. Can I sell at current levels and book profits? What is the outlook for this stock?

R Subramanian

Federal Bank (₹132): The stock has been in a strong uptrend since April 2020. This uptrend has come up to a very important hurdle. A strong trend resistance is at ₹140 which has been tested already. However, an immediate support is at ₹129. If the Federal Bank breaks below this support, a corrective fall is very much possible. Such a break can drag the price lower to ₹117-₹115. However, a further fall below ₹115 is less likely.

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We see high chances for the stock to begin a fresh leg of rally from the ₹117-₹115 region. From a long-term perspective, Federal Bank has the potential to target ₹180 over the next couple of years. Assuming that you are a long-term investor, we suggest you follow the strategy given below.

Keep a stop-loss at ₹127 for just 20 per cent of your holding and exit this amount if the price falls below the support at ₹129. However, you can consider buying back the stock at ₹121 again to the quantum that you had exited. Keep the stop-loss at ₹108 for the entire position. Move the stop-loss up to ₹132 when the stock touches ₹148. Revise the stop-loss further higher to ₹158 when Federal Bank price touches ₹168. Exit the stock at ₹178.

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