The Hindu Business Line : Query Corner

Ennore Foundries (Rs 143.6): Though there is a possibility of a rally to Rs 165-170, such a pull back would be in the nature of a technical correction. The stock is in a downward trend that is not complete as yet. A drop to the Rs 110-115 range appears likely. Remain invested with a stop-loss at Rs 140. Fresh exposures may be avoided. Look to reduce exposures on rally.

Please advise whether to sell or hold Steel Authority of India (SAIL) bought at Rs 52. — A.V.S. Murthy

SAIL (Rs 52): The recent slide in the broad market has taken a toll on this stock as well. There is scope for a rally to the immediate resistance level of Rs 59-60. Look to reduce exposures on rally as there is no evidence to suggest that the recent downtrend is complete. Hold with a stop-loss at Rs 49. A close below this level could push the stock to the Rs 40-42 range.

Kindly furnish your view on Hyderabad Industries. — Krishna Kumar

Hyderabad Industries (Rs 478): The near-term trend is bearish and the stock faces resistance at Rs 495-500. A close above this range is a pre-requisite for the reversal of the bearish trend. A drop to Rs 420-440 appears likely. Sell a portion of the holdings now and have a stop-loss at Rs 440 for the balance.

What is your outlook on Sundaram Finance? — N. Ramabhadran

Sundaram Finance (Rs 352): After touching a high of Rs 409 a few weeks ago, the stock has been in a corrective phase. There appears to be no signs of the completion of this corrective phase. Investors may consider at least partial profit booking. Fresh exposures may be considered on evidence of support at Rs 300-310. A weekly close below Rs 300 would have further bearish implications.

Should I hold or sell Jindal Drilling bought at Rs 253 and VSNL at Rs 385? — E. Raju

Based on the queries received from the readers, we find that time and again investors hold on to loss-making positions. Investors must have a concrete plan for exiting a position. The exit be triggered either by the stop-loss been breached or by the stock price reaching the target zone. No trade should be considered unless these two levels are firmed up. And, the most important aspect is to stick to the exit plan. There is no point hanging on to a losing trade just in the hope of a recovery at a later date. Unless this basic discipline is not adhered to, investors are bound to see erosion in their net worth.

As far as Jindal Drilling (Rs 182) is concerned, the stock would find it difficult to get back towards your entry levels. It would be advisable to look for opportunities to reduce exposures on an upward move. Stop-loss for long positions may be placed at Rs 169. Use a trailing stop-loss if the stock were to seek higher levels.

VSNL (Rs 317): There is a possibility of a drop to Rs 265-270. This view would be valid if the stock fails to move past the resistance zone at Rs 335-340. A close above Rs 340 would indicate that the downtrend is complete and the stock could move towards the Rs 395-400 band. Remain invested with a stop-loss at Rs 290. Fresh long positions may be considered from a trading perspective, with a stop-loss at Rs 290.

Kindly elaborate on the long-term outlook for Tata Investment. — Aman Jindal

Tata Investment (Rs 314): The outlook is positive and a move to Rs 375-380 appears likely. The positive outlook would be in force as long as the stock remains above the bearish trigger level of Rs 280. Remain invested with a stop-loss at Rs 279 and sell a portion of the holdings if the stock faces resistance at the Rs 375-380.

Guide me about the prospects of ONGC and Gujarat Gas Ltd. — Arvinder Bhasin

ONGC (Rs 957): There is scope for recovery to Rs 1050-1100 in the short-term. The stock is, however, likely to resume the downtrend on the completion of the short-term rally. A drop to Rs 880-890 appears likely. It would be better to stay cautious in the stock as its fundamentals are governed by government policy as well as the international crude oil prices. Given the relatively uncertainty attached to the earnings stream, the stock is likely to be volatile.

Gujarat Gas (Rs 1044): We are unable to arrive at a firm conclusion about the outlook for the chart based on the recent price action. We believe that the price movement in the next few weeks could offer some clarity. Besides, there are quite a few instances where the low of the day would have not be in sync with the price range recorded in the earlier days. Such distortion occurs owing to relatively low floating stock and instances of freak quotes getting registered on low volumes. This makes the task of analysing the price trend that is much more difficult.

I have a significant chunk of Hinduja TMT at Rs 345. What is your view on this stock? — Suhas Pai

Hinduja TMT (Rs 378): The near-term outlook is positive and a move to Rs 425-430 appears likely. Taking into account your entry price and near-term positive outlook, there is no reason to sell the stock now. Hold with a stop-loss at Rs 360 for a portion of the holding and at Rs 340 for the balance. Investors having a higher degree of risk tolerance may have the stop-loss at Rs 340 for the entire holding.

Please advise whether to hold or sell Excel Crop Care purchased at Rs 259. — Subur Basha Shaikh

Excel Crop (Rs 198): Though the stock could see some recovery in the next few weeks, the chances of it moving to your purchase price appears remote. The momentum behind the recent fall is indicative of the bearish sentiment towards the stock. Hold with a stop-loss at Rs 175. An upward move would face resistance at Rs 225-230. Look to reduce exposures if the stock faces resistance at this price band.

I purchased Hi-Tech Gears at Rs 210. Could you please tell me the target price and the outlook for the company? — V. Sridhar

Hi-Tech Gears (Rs 199): The stock is in a sideways consolidation phase. A move to the Rs 225-230 range appears likely on the completion of the present phase of consolidation. Hold with a stop-loss at Rs 184 for a portion of the holding and at Rs 174 for the balance. A close above Rs 210 would have positive implications and propel the stock into the next leg of the bullish trend.

I would like to know your opinion on Chemplast Sanmar. I bought huge quantity at Rs 100. As I would like to hold for a long term, please let me know if it is advisable to accumulate more at lower levels. — B. Naren

Chemplast Sanmar (Rs 73): This is one of the stocks that have failed to move in sync with our expectations. Though the long-term outlook is positive, there is a possibility of the stock declining to the Rs 57-58 range. We continue to be bullish on the company and a move to the Rs 135-140 range is not ruled out.

The only hitch in your case is the purchase price of Rs 100. We would have no inhibition in advising investors to buy at around Rs 60-62 levels, with a stop-loss at Rs 56.

As you already have a significant holding at a fairly high price, we would not advise taking more exposures until there is evidence of the resumption of the long-term uptrend. A weekly close above Rs 84 would be an early indicator of the start of the next leg of the rally.

As the depreciation in the value of the rupee has been touted as a reason for the pull out of money by the FIIs, what is your take on the near-term outlook for Rupee? — B. Vijayalakshmi

After hitting a low of 45.415, the rupee has strengthened a bit in the last couple of days. This recovery is likely to be temporary in nature. After a near-term recovery to the 44.9-45 range, the rupee is likely to weaken against the US Dollar.

From a technical analysis perspective, we are looking at a fall to the 46.5-47 level once the move to the 44.9-45 range is over. This is the short-term outlook, and the long-term outlook would hinge on the way the rupee behaves once it reaches the crucial support at the 46.5-47 band. A convincing breach of this range would have further negative implications.

(Note: 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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