The Hindu Business Line : Query Corner

Asian Paints (Rs 312.5): The near-term outlook appears weak. The stock is, however, likely to resume the earlier upward trend after the completion of the near-term downtrend. Taking into account your entry price and long-term outlook, it would be advisable to remain invested. The stock is likely to move to the Rs 345-350 range. This view would be valid so long as the stock trades above the Rs 280 mark. A decline below Rs 280 would be a negative development, and would warrant reduction of holdings.

Allahabad Bank (Rs 35.5): The stock could seek lower levels in the near term. A drop to the Rs 31-32 range appears likely. Hold with a stop-loss at Rs 28, as the stock is likely to resume the rally after the expected drop to the Rs 31-32 range. Risk-averse investors may sell at present levels, and consider re-entry on evidence of support at about Rs 30-31. Alternatively, buying may also be considered if the stock closes above Rs 44, without dropping below Rs 29.

I bought UCO Bank (Rs 20.5 )and Welspun Gujarat (Rs 33.50). Should I hold or sell these stocks? — S. Sharma

UCO Bank (Rs 18.2): It is difficult to assess the outlook for the stock due to limited price history. We are not in a position to offer a view on the your holdings in this stock.

Welspun Gujarat (Rs 32.5): There appears to be limited downside risk as the stock appears to have completed the earlier downward move at Rs 25. A move above Rs 37 could push the stock to higher levels of Rs 44-46. The positive outlook would be valid as long as the stock trades above Rs 28. A drop below Rs 28 would negate the positive outlook and lead to weakness.

I am holding shares of McDowell (Rs 52). Please advise whether to hold or sell the stock. — A. Abdul Rehiman

McDowell (Rs 60): It would be better to sell at least a portion of your holdings as the outlook does not appear positive. The stock has been stuck in a trading zone in the recent months, and no discernible long-term trend is evident. A close below Rs 54 is likely to lead to weakness. Risk-seeking investors may hold with a stop-loss at Rs 54. The rest may consider partial liquidation of holdings at prevailing levels.

Is it advisable to invest in Nava Bharat Ferro Alloys and Asian Electronics? — Dr George Thomas

Nava Bharat Ferro (Rs 294): The stock has witnessed a sharp run-up in recent weeks. Though there is still upside potential, it would be better to adopt a cautious approach. Aggressive traders willing to take risk may contemplate long positions on a close above Rs 303, with a stop-loss at Rs 270. On the weekly charts, there is a strong support at Rs 240-245. Conservative investors could wait for declines and take exposures closer to this support range. This would ensure that the stop-loss is tight. Long-term investors may also buy this stock with a stop-loss at Rs 270, if the stock fails to decline to this range and moves above Rs 303.

Asian Electronics (Rs 72.8): The entire from the low Rs 28 does not appear to be part of a new bullish trend. The overlapping nature of the recent upward move indicates that the rally is a correction to the earlier fall from Rs 100 to Rs 28. We would not recommend a buy. This does not, however, preclude the possibility of a rally to higher levels.

Could you provide your views on Hindustan Lever (Rs 114.9) and Petronet LNG (Rs 22.9)? Lijoo K. John

Hindustan Lever (Rs 107): There are no signs of a reversal of the ongoing bearish trend. A decline below Rs 90 would lead to weakness and could result in a drop to the Rs 78-80 band. Existing holders may look for opportunities to reduce exposures. Fresh buying may be considered on evidence of support either at the Rs 91-92 range or at the Rs 78-80 range.

Petronet LNG (Rs 22.2): It is not possible to arrive at a conclusion on the medium-term trend owing to insufficient data; the stock got listed recently. We are not in a position to offer any suggestion on this stock.

What is the outlook for Jagsonpal Pharma (Rs 42) and UTI Bank (Rs 130)? — Subramanian

Jagsonpal Pharma (Rs 34.6): The stock is thinly traded. Average trading volumes hover about 2000-2500 shares per day. In such a stock, the movement tends to be highly volatile; arriving at a stop-loss or arriving at targets is fraught with risk. We are not in a position to arrive at any conclusion about the near-term trend. Investors may hold with a stop-loss that suits their risk profile.

UTI Bank (Rs 115): The outlook for the stock does not appear positive. Drop to the Rs 105-108 range appears likely. A decline below Rs 104 would have negative implications and could push the stock down to the Rs 92-95 range. Remain invested with a stop-loss at Rs 104 and use any price increase to reduce exposures.

I hold shares in Rolta and Bharti Tele-Ventures. Should I hold, exit or add to my positions? — Sunil K Jha

Rolta (Rs 62.1): There are no signs of an upward trend. It has been on a long-term decline. There is, however, the possibility of a near-term bounce to the Rs 72-75 range. This view would, however, be valid if the price holds above Rs 54. A drop below Rs 54 would have bearish implications. Hold with a stop-loss at Rs 54. Traders with an appetite for risk may consider long positions on a break above Rs 64, with a stop-loss at Rs 57. This would be a short-term trading strategy, which would not be advisable for investors who are comfortable with a "buy and hold" approach.

Bharti Tele-Ventures (Rs 142.4): The stock appears to be headed to the Rs 120-122 range. A drop below Rs 134 would confirm this view. Hold with a stop-loss at Rs 133 and a trailing stop-loss may be employed in the case of an upward move. There is no reason to buy this stock now.

I purchased City Union Bank (Rs 72) and Precision Wires (Rs 20). Should I hold or exit? — M.H. Shivashankar

City Union Bank (Rs 58.5): The near-term outlook appears weak and a drop to the Rs 48-49 range appears likely. Taking into account your entry price and quantum of holding, it would be safer to sell a portion at the prevailing price. For the rest, have a stop-loss at Rs 47. Investors who are uncomfortable with this strategy may sell a major portion of their holdings at present levels. Fresh buying may be considered if the price moves above Rs 75.

Precision Wires (Rs 50.5): The near-term trend appears positive. A move to Rs 58-60 appears likely. Considering your entry price, it would be worth the risk to hold with a stop-loss at Rs 44 for a portion of the holding. For the rest, the stop-loss may be placed at Rs 40. Evidence of resistance at around Rs 60 may be used to reduce exposures. Fresh buying may be avoided.

My average purchase price of BHEL is Rs 563 and that of KPIT Cummins, Rs 373. Should I hold these stocks from a long-term perspective? — Jawahar K

BHEL (Rs 528): After hitting a high in April 2004, the stock appears to be in a corrective phase now. The downward corrective phase does not appear complete. There is a possibility of a drop to lower levels of the Rs 475-480 range. Investors holding profitable positions may consider at least partial profit booking. Investors with a higher risk preference may hold with a stop-loss at Rs 510, and may reduce holdings on a further rise in the price. Only a move past Rs 590 would be a positive trigger and negate the negative outlook. Fresh buying in small lots may be considered on a weekly close above Rs 590.

KPIT Cummins (Rs 385): The stock appears to be headed to higher levels. A move to the Rs 410-415 range appears likely in the near term. Aggressive investors may hold with a stop-loss at Rs 330; those uncomfortable with this stop-loss may have the stop-loss at a slightly higher level of Rs 350. There is no reason to liquidate holdings at present levels. Only a drop below Rs 330 would negate the view.

Based on past analysis in these columns I purchased Man Industries at Rs 93, Cadila Healthcare at Rs 483, Premier Instruments at Rs 32, SKF at Rs 92 and Vijaya Bank at Rs 46. What are the prospects of these stocks? — Nagendra

We wish to emphasise that the entry, exit and stop-loss levels mentioned in these columns need to be strictly adhered to. The view/recommendation would stand negated if the stock breaches the stop-loss level mentioned along with the recommendation. The views expressed would generally be applicable to the person who has raised the query. The reply should not be construed as relevant to all investors. In certain circumstances, we also provide buy/sell recommendation that would be applicable even to investors other than the one who has raised the query. In such cases, positions may be considered with the stop-loss mentioned along with recommendation. The outlook for individual stocks listed by you would be featured in the forthcoming weeks.

Readers can send in their queries, on not more than two companies, to

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We would endeavour to answer as many queries as possible. However, constraints of space will limit the responses featured under this column.

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