The Hindu Business Line : Query Corner

Aptech Training (Rs 41.5): There are no signs of bullishness on the charts. Only a close above Rs 48 would impart positive momentum. It would be better to reduce exposures and switch to other stocks with a positive outlook. Fresh buying may be considered when the stock closes above Rs 48.

Mukta Arts (Rs 58.7): Though the stock has recovered from the recent low of Rs 44, the upward move does not appear convincing. The recent recovery does not indicate the start of a strong uptrend. Hold with a stop-loss at Rs 53. A trailing stop-loss may be used in the event of a sustained rise. Evidence of resistance or weakness at the Rs 65 mark may be used to reduce exposures.

What is the outlook for Karnataka Bank bought at Rs 78? — P. Rama Krishna

Karnataka Bank (Rs 89): The near-term outlook appears positive. A move to Rs 95-98 appears likely. Only a decline below Rs 70 would negate the positive outlook. Hold with a stop-loss at Rs 70. Stop-loss may be tightened once the stock moves closer to the resistance level at the Rs 98-100 zone.

We have invested heavily in Tata Teleservices at Rs 22 and Andhra Bank at Rs 55. What are the prospects? — V. Sidharthan & Keshav

Tata Teleservices (Rs 18.3): The stock is yet to move out of the narrow trading that it has been confined to in recent weeks. A strong move would take place in the direction of the breakout from this range. The longer the time spent in this range, the greater would be the degree and the volatility of the move. Shareholders may hold with a stop-loss at Rs 17.

Andhra Bank (Rs 50.9): The stock could seek higher levels of Rs 58-60 in the near term. There is no reason to sell the stock now. Hold with a stop-loss at Rs 45. Short-term traders may consider long positions on a move above Rs 52, with a stop-loss at Rs 48. A drop below Rs 40 would negate the positive outlook and would impart weakness. Long-term holders who have entered at lower levels may place the stop-loss at Rs 40.

If you are in need of funds immediately, it would better to sell a portion of the holding in Tata Teleservices as this stock is not headed anywhere while there is scope for appreciation in the case of your other holding - Andhra Bank. Instead of waiting for the breakout to happen, it would be better to sell a portion of the stake in Tata Teleservices and have a stop-loss at Rs 17 for the rest.

I was allotted shares in Worldwide Leather at Rs 10; I also purchased a large number of shares of SAIL at Rs 44? What is the outlook for these stocks? — P.C. Agarwala

Worldwide Leather (Rs 5.9): The chart pattern does not throw up any meaningful signals above the outlook. Trading has been volatile and marked by low volumes. We are not in a position to give an opinion on this stock.

Sail (Rs 44.8): The outlook appears positive and a move to the Rs 52-54 range appears likely. The positive outlook would be valid as long as the stock trades above the stop-loss level of Rs 37. A decline below Rs 37 would not only negate the positive outlook, but would impart weakness as well. Hold with a stop-loss at Rs 37. Taking into account the quantity of your holding, it would be safer to take profits in a graded fashion at various price levels. In the event of an upward move, a portion of the holding may be retained with a stop-loss at Rs 37 while profit booking may be considered at different price levels for the remaining holding.

I bought TCS at Rs 1,035 and Tata Steel at Rs 272. What is the outlook for these stocks? — Krishnamurthy

TCS (Rs 1028.8): As the stock was listed recently, the price history is inadequate to arrive at a technical outlook for the stock. The outlook from a fundamental perspective would be featured once the company comes up with its performance for the quarter ended September 2004.

Tata Steel (Rs 289.4): The outlook for the stock appears positive. A move to the Rs 310-315 range appears likely in the near term. Hold with a stop-loss at Rs 280. There is no reason to sell this stock at prevailing price levels. Only a drop below Rs 238 would negate the positive outlook for the stock.

Please advise about my holding in Maruti Udyog at Rs 550. You had indicated earlier that it would fall to Rs 320. How does it look now and how long will take to recover my money. — Ankit Agarwal, Dilip Singh & Tarun K.Gupta

Maruti (Rs 368): There is no bullish sign in sight. Only a move past Rs 450 would impart positive momentum. Given this backdrop, there is no reason to take exposures now. Short-term traders may go long on a break above Rs 376, with a stop-loss at Rs 360. Long- term investors and the ones who believe in the "buy-and-hold" approach to investment may stay clear of the stock. The possibility of the drop to the earlier mentioned target of the Rs 320-330 range is still valid. Hold with a stop-loss at Rs 348. Reduce exposure on price rally.

Based on your view that the Mangalam Cement stock would move to the Rs 65-67 range, I bought the stock at Rs 51.75. What is your view now? — Dilip Singh

Mangalam Cement (Rs 52.2): The stock has been stuck in a narrow trading range since the time we recommended the stock a couple of weeks ago. It was, however, mentioned that the stock would remain weak in the near term. The stock is still in the corrective phase and the expected upward move to the Rs 65-67 range is still valid. This view would be valid as long as the stock stays above the earlier mentioned stop-loss level of Rs 42. Hold with a stop-loss at Rs 42 and look to reduce exposures once the stock nears the target range.

Please advise what I should know with the shares of IDBI bought at Rs 78 and Bank of India at Rs 52? Of the two stocks, which is likely to yield better returns over the long term? — Natwar Agarwal

IDBI (Rs 86.3): The outlook for the stock appears positive. It could move towards the Rs 95-98 range. This view would be valid as long as the stock rules above the stop-loss level of Rs 78. Hold with a stop-loss at Rs 78.

Bank of India (Rs 52.2): After a sharp drop, the stock has recovered ground in the recent weeks. The stock appears to hit a short-term overbought zone. A short-term weakness or at least a sideways price action may materialise shortly. Hold with a stop-loss at Rs 48. Fresh buying may be considered if the stop-loss is triggered and the stock moves above Rs 55 subsequently.

Between the two stocks, IDBI appears to have the potential to yield better returns in the near term. From a longer-term perspective, Bank of India may turn in a better performance as it could start a fresh leg of upward trend after completing a short-term weakness.

I am holding shares of Cosmo Films purchased at Rs 57 and Adani Exports at Rs 62. Please advise on their prospects. — Gunpreet Kaur

Cosmo Films (Rs 64.4): The stock could seek higher levels in the near term. The long-term trend would turn bearish only if the stock closes below Rs 52. Taking into account your entry price and positive outlook, it would be advisable to remain invested. Have a stop-loss at Rs 51. Short-term traders may go long on a break above Rs 69, with a stop-loss at Rs 61.

Adani Exports (Rs 60.4): Though the long-term outlook appears positive, there are no signs of the completion of the downtrend that commenced on July 27. The chance of a decline to lower levels of the Rs 52-55 range is not ruled out. Risk-averse investors may sell at prevailing levels and contemplate buying at lower levels. Fresh buying may be considered with a close stop-loss if the stock breaks above Rs 68. — B. Krishnakumar

Between January and May this year, a number of your stocks that you recommended hit the stop-loss level and went down. I have been observing your recommendations and there have been hardly any failures except during the above period. How long do these periods last and how do investors handle them? — Samuel

Though we strive to achieve the magical 100 per cent success rate, it is not practically possible to do so. It is even more difficult to sustain it over a longer time period. We would be satisfied if the success rate stabilizes at about the 70-75 per cent range. Over a period of five years we have measured up to this yardstick.

Several of our recommendations have also, however, gone awry during this period. Recommendations where the stop-loss is breached will neither be uniformly spread over the year or recur in the same period year after year.

In a particular timeframe, the success rate may even be close to 100 per cent. But this could be followed by a series of recommendations for which the stop-loss may be breached. In this backdrop, it will not be possible to generalise that the recommendations made during any particular part of the year would not pan out as expected.

It is in this context that the concept of money management assumes significance. This would be the final determinant of the quantum of money you make in the market. Strict adherence to stop-loss levels and periodical profit booking would ensure healthy returns over a long term.

(The analysis and opinion expressed in these columns are based on the technical analysis of the past price behaviour. Opinion and price targets are based on the Elliott Wave Analysis. The stop-loss level provided with the recommendation is important. The original view would stand negated if the stop loss level is breached. There is a risk of loss in trading)

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