The Hindu Business Line : Query Corner

I am planning to invest in Nagarjuna Construction. What are the prospects of this stock with a one-year time frame and what would be the correct price to enter? Shivangi Upadhaya

Nagarjuna Constructions (Rs 314.5): Nagarjuna Constructions is in a strong long-term bull market. Though the stock was in a consolidation phase in the one-year period following April 2006, it broke out to commence the third leg of this long-term bull market in September.

The stock has, however, been extremely volatile in the last couple of months, oscillating in a 100-point band between Rs 250 and Rs 350. Investors who wish to buy this stock can do so near the lower boundary of this range with a stop at Rs 220. The stock has the potential to move above Rs 400 over the next one year.

I hold a few shares of Varun Shipping. What is the future prospect for this stock? Padmanabhan Ponnappan

Varun Shipping (Rs 74.1): Varun Shipping has recorded a significant long-term trough at Rs 49 in March and has rallied steadily since this low. This move can be enclosed within an upward moving trend channel. Intermediate-term resistance for the stock is present around Rs 80. Though there might be a struggle, we expect the stock to get past this level and rise to its high peak at Rs 99 over the next one-year. Hold the stock with a stop at Rs 63.

I hold Accentia Technologies purchased at Rs 195. Please advise about the near-term outlook of this stock. Dipti K

Accentia Technologies (Rs 178.6): Accentia Technologies has been one of the multi-baggers in the last one year, rallying from a low of Rs 40 in November 2006 to its all-time high peak of Rs 265 this August. However, the rally has halted after this peak and the stock is currently moving in a sideways consolidation band between Rs 180 and Rs 260.

Such a sideways move is positive for the long-term. Investors can hold the stock as long as it stays above Rs 150. If this support holds, the stock will move past Rs 300 over the next 12 months.

I would like to know the future prospects of Thomas Cook. S.D. Chandrasekhar

Thomas Cook (Rs 72.4): The stock has been in a long-term consolidation phase since 2004. The range for the stock (price adjusted after stock split) lies between Rs 45 and Rs 70. It has always reacted violently on moving past the upper boundary of this long-term range.

Thomas Cook has witnessed a sharp surge since November 19 that has made it move from Rs 58 to Rs 80 in just three trading sessions. Since the stock has now moved close to its long-term resistance, partial profit can be booked at these levels. The rest of the shares can be held with a stop at Rs 67.

Could you please express your views on JP Hydro for both short-term and medium term? Sudheer

Jaiprakash Hydro-Power (Rs 113.9): In our previous review of JP Hydro in July, we had mentioned that a strong long-term resistance exists around Rs 40. We had expected the stock to reverse from this resistance and move lower.

But JP Hydro has made an astounding move since its breakout above this level in August, moving from Rs 40 to the recent peak at Rs 118. The stock could move sideways between Rs 90 and Rs 120 in the short-term. Short-term investors can buy the stock as it moves close to the lower boundary of the trading range with a stop at Rs 88. The stock can move up to Rs 140 in the medium-term. The medium term view will turn negative only if the stock falls below Rs 80.

What is the future outlook for Eastern Silk stock? Madhukar Tankkar

Eastern Silk (Rs 215.0): Eastern Silk formed a long-term peak at Rs 363 on January 22 and has been declining since then. This fall has made the stock retrace more than 50 per cent of the gains recorded since 2003. The long-term support for the stock exists at Rs 140. We expect this level to cushion any further fall in the stock over the next 12 months.

However, the medium-term trend in the stock is rather weak and it can struggle to get past Rs 260 over the next three months. Investors with a short-to-medium term perspective can exit the stock as it rallies to this resistance. Long-term investors can hold the stock with a stop at Rs 135.

Can I buy Lanco Infratech and Power Grid Corporation at the current price? P.V. Subramanian

Lanco Infratech (Rs 531.8): Lanco Infratech does not have sufficient history but the stock has recorded a strong up-move from the April trough at Rs 137 to Rs 490 in October. Since then, the stock has been moving sideways in a bullish ascending triangle pattern. The fact that the correction retraced only 38.2 per cent of the previous up-move is also a positive for the long-term outlook in this stock.

You can purchase the stock at current levels with a stop at Rs 485 if you are a short-term investor. The stock has the potential to rally to Rs 600, once it breaks out past Rs 540.

Power Grid Corporation (Rs 147.9): Power Grid Corporation had a dream run since its listing, almost doubling from its listing price of Rs 89. But the stock is currently in a corrective mode. It is expected to move sideways between Rs 135 and Rs 170 for a few months before the next leg of the up-move takes off. If the stock dips below Rs 135, it can fall to the support zone between Rs 115 and Rs 120. Investors can watch out for buying opportunity in this band.

Please tell me the price target for Deccan Aviation. Vinay

Deccan Aviation (Rs 242.9): Projecting the price target for a stock such as Deccan Aviation is a difficult task since the stock is in un-chartered territory and former resistances are not present to act as future targets. Elliott Wave projections cannot be applied here either.

The best strategy to adopt in stocks that are in an over-drive such as Deccan Aviation would be to hold the stock with a trailing stop loss of 20 per cent from the peak. A trailing stop loss is a mobile stop loss that is re-calculated at the end of each trading day and moved higher as long as the stock keeps recording new peaks. Once the stock makes a lower peak, the trailing stop loss is frozen at the previous day’s level (not moved lower). This ensures that a large portion of the profits is preserved.

Near-term support for Deccan Aviations is present at Rs 230. Subsequent supports for the stock are present at Rs 220 and then Rs 207.

Let me know the prospects of Essar Steel for a period of one-to-two years. P. Selvaraj

Essar Steel (Rs 47.1): Essar Steel went in to a tizzy in the second week of November when speculation concerning the de-listing price sent the stock to a high of Rs 70. But it fell to Rs 45 in the next couple of days when the discovered price was revealed as Rs 48. The stock price is hovering close to this price since then. The shares will not be traded on the exchanges once the exchanges grant the approval for de-listing the shares. But the company will continue to buy the shares at Rs 48 in the six months following the de-listing. If you are holding shares in this company, you can either offload the shares in the market at current price or surrender the shares to the company in the six months following de-listing.

— Lokeshwarri S.K.

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