Short-term uptrend in Dr. Reddy's, BHEL

B. Krishnakumar

CONTRARY to expectations, the Sensex failed to take-off on a rally last week. The lack of momentum and lacklustre trading activity does not portray a positive picture of the near-term trend. The only encouraging aspect is that the Sensex has managed to stay above the key level of 3,774 mentioned last week.

The lacklustre market trend and the recent price pattern continues to support the view that the Sensex is still vulnerable to test the previous bottom at 3,492.

On the upside, the Sensex faces resistance at the 3,900-3,985 level. A move past the 4,053-level would be minimum requirement for the onset of a positive trend for the Sensex. Given the current market scenario, the price uptrend could be used to book profit in key index stocks.

The focus this week is on the stocks of Dr. Reddy's Laboratories, HDFC and BHEL, in which the short-term trends appear positive. Existing holders could remain invested and use price rally to book profit. Aggressive short-term traders could also contemplate long positions, with a close stop, in Dr. Reddy's and BHEL.

Dr. Reddy's: The share price of Dr. Reddy's Laboratories has completed a short-term downtrend. It could see firm trend in the near term.

However, given that the medium-term trend is still down, existing holders could book profit on price upmoves. Traders with a high risk appetite could contemplate long positions with a conservative profit objective of Rs 1,375.

HDFC: Similar to Dr. Reddy's, the short-term outlook for HDFC also appears positive. Existing holders could remain invested and use price rally to lighten holdings in the stock.

Given the sharp rally in recent days, fresh buying may be avoided in HDFC. A move past Rs 520 could be used to cut exposures in the stock.

BHEL: The BHEL stock could also see a firm trend ahead. The scrip has managed to stage a recovery in the last couple of days. It could touch a price target of about Rs 140-145 in the next few weeks. Existing holders could book profit once the stock nears the target zone. A decline below Rs 100 would negate the possibility of a rally to the Rs 140-level.

Recommendation follow-up

The price action in Nestle India, ACC and MTNL was in tune with the previous week's recommendation. Despite the overall flat trend, the ACC stock took off on a rally. As mentioned last week, the scrip appears headed towards the price target of Rs 150. Existing holders could gradually book profit on price rally. Fresh exposures may be deferred for the time being.

The Nestle India stock too managed to rule firm last week. The trend in the stock could reverse direction shortly. Existing holders could contemplate profit booking at around the Rs 515-520 range. Fresh buying may be avoided. Aggressive traders could contemplate short positions on evidence of weakness at the Rs 520-mark.

The share price of MTNL has eased just below the support level of Rs 148-153, mentioned last week. The recent price action indicates that the stock could embark on a short-term rally. Existing holders could, therefore, remain invested and cut exposures once the stock moves closer to the Rs 160-mark. Fresh buying may be contemplated with a stop loss at or below Rs 142.

(Note: Recommendations in this column are based entirely on technical analysis of the past price behaviour of the scrip concerned. There is a risk of loss in trading.)