Downsize holdings in SBI, L&T

B. Krishnakumar

AS expected last week, the Sensex witnessed a subdued trend.

As the recent downtrend is yet to be completed, existing holders of index stocks could look for opportunities to book profit on price uptrend. Fresh long positions may be deferred for the time being in index stocks. Long term investors could contemplate fresh exposures in index stocks once the Sensex moves closer to 3490-3590 range.

The focus this week is on State Bank of India (SBI), Larsen & Toubro (L&T) and Ranbaxy Laboratories. The short term outlook for the three stocks does not appear positive. Existing holders of these stock could cut exposures. Very aggressive traders could contemplate short positions with a close stop-loss in the case of SBI and Ranbaxy.

The L&T (Rs 201.9) stock is in the midst of a downtrend. The scrip could slide to its near term support at Rs 180-190 range. Existing holders could trim exposures. Aggressive traders could contemplate short positions, with a stop-loss at Rs 208 if the share price declines below Rs 199. A move past Rs 208 would warrant closure of existing short positions.

The share price of SBI (Rs 221.25) could seek lower levels if the recent price pattern is any indication. The scrip could decline to the Rs 205-210 range.

Existing holders could book profit. Fresh short positions may also be contemplated with a close stop loss in SBI.

Similar to SBI, the near term outlook for Ranbaxy Laboratories (Rs 649) does not appear positive.

Fresh exposures may be avoided while existing holders could lighten holdings in the stock. Fresh short positions may be contemplated by high-risk traders with a stop loss at Rs 673.

Recommendation follow-up

The price movement in Tata Tea, Global Tele-Systems and Tata Steel was almost on course with last week's recommendations. In accordance with expectations, the share price of all the three companies turned weak in the previous settlement. After touching a high of Rs 293.4, the share price of Tata Tea turned weak and closed at Rs 277 on Friday. The near term outlook for Tata Tea continues to remain subdued. Existing holders could book profit. Fresh buying may be contemplated on the evidence of support in the Rs 235-245 range.

Though the Global Tele-Systems stock did not move to the resistance zone of Rs 920-950 mentioned last week, it, however, turned very weak in the previous settlement. The scrip touched a low of Rs 701.3 and has since been moving in a relatively narrow range. In the last couple of days, an Inside-Day pattern is visible which basically indicates indecision at the market place.

A break-out on either side could be used to take fresh positions in Global Tele-Systems. A move past Rs 751 could be used to take long positions with a stop loss at Rs 714. Alternatively a decline below Rs 715 could be used to initiate fresh short positions with a stop-loss at Rs 752.

In tune with expectations, the trend in Tata Steel stock turned weak. The stock declined from the earlier week's close of Rs 132.8 to settle at Rs 128.25. The stock appears to be moving towards its support level of Rs 120. Existing holders could remain invested while fresh buying may be contemplated once Tata Steel declines to Rs 120.

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