What are the medium and long-term prospects of Reliance Communications? Ketan Lilani
Reliance Communications (Rs 338.8): In our review of Reliance Communications in January this year, we had expected a move between Rs 150 and Rs 300 for a few months. 12-month target for the stock was then given between Rs 400 and Rs 450.
The stock recorded a low of Rs 131 in March this year and the strong medium-term up-trend since then that has taken it to the peak of Rs 347.
Key medium-term targets for the stock are at Rs 347 and Rs 406, which is 30 and 38.2 per cent retracement of the down-move from January 2008 peak.
A reversal from either of these levels can take the stock lower to Rs 265 or Rs 215 again. Medium-term investors can book some profits on a reversal from Rs 347 or Rs 406.
Our preferred view is a move between Rs 150 and Rs 400 for the next 12 months. Target on a break above Rs 400 is retained at Rs 500 and Rs 580.
Rolta India (Rs 140.5): In our review of this stock in December 2008, we had given the stop loss for long-term investors at Rs 100 and had advised that this stock can be divested in rallies. There was no respite for Rolta in 2009 and the stock finally bottomed at Rs 40 in March this year.
The stock has long-term support in the band between Rs 28 and Rs 40 and a sustainable trough could have been formed this March. Long-term investors can therefore hold the stock as long as it trades above this level. This stock can rally to Rs 200 over the next 2 years.
However, the stock is currently pausing around the key medium-term resistance band between Rs 140 and Rs 150 where the 200-day moving average is also poised. If the rally continues in the short-term, next target is Rs 175. A reversal from any of these levels (Rs 140, Rs 150 or Rs 175) can cause a decline towards Rs 110 or Rs 85 over the medium term.
Investors with a short-to-medium term horizon can therefore book some profit on a reversal from the levels mentioned above.
3i Infotech (Rs 83.5): 3i Infotech has been one of the multi-baggers of the rally recorded since March this year with over 250 per cent gain in the last three months. The stock has moved past the key medium-term resistance at Rs 78. Subsequent targets based on retracement levels are at Rs 95 and Rs 112.
Since there is hardly any let-up in the momentum, investors with a short-term perspective can hold with a trailing stop of 20 per cent from the recent peak.
Medium-term investors can hold the stock with a stop at Rs 65. Stop for long-term investors can be deeper at Rs 50.
I am holding Jindal Saw purchased at Rs 210 and DLF at Rs 191.What is the medium and long-term outlook on these stocks? Amit Sajeja
Jindal Saw (Rs 435.9): Jindal Saw had appeared to be spiralling lower into a bottom-less pit in the first two months of the year. But the decline halted at Rs 135 in March; the stock’s been on a spectacular rise ever since.
Medium-term targets for the stock are Rs 460 and Rs 550. Failure to move above these levels can result in the stock declining to Rs 250 over the next three months. Investors with a short-to-medium term perspective can therefore book some profits on failure to move above these resistance levels.
The long-term view has also turned positive for this stock. Though there can be a pullback to Rs 330 or Rs 250 in the medium-term, the stock can rally to Rs 700 and Rs 820 over the next two years. Long-term investors can therefore hold the stock with a stop at Rs 250.
It has moved strongly beyond its long-term down trend line as well as the long-term 200-day moving average indicating that a sustainable trough could be in place at Rs 135.
The band between Rs 220 and Rs 270 where the stock fluctuated for a month between April 15 and May 15 will provide support once the stock begins declining. Investors with a long-term perspective can therefore hold the stock with a stop at Rs 200. The target for this stock for the next 12 months is between Rs 550 and Rs 570.
However, the stock is currently close to the key medium-term resistance of Rs 410. A reversal from here can cause a decline to Rs 312 or Rs 240 over the medium term. Therefore investors with a lower investment horizon can book some profits at current levels and hold the rest with a stop at Rs 300.
I have bought Power Grid at Rs 116 and Chambal Fertiliser at Rs 66. Please advise when I can exit the stocks. Milind Sawant
Power Grid Corporation (Rs 125): Limited trading history makes it difficult to form a long-term view on this stock. Retracement of the previous down-move from November 2007 peak gives us the targets for this rally (from Rs 51.7) at Rs 96, Rs 110 and Rs 125. The stock struggled with the first resistance in March and April 2009 before breaking higher to the third target in May.
Needless to add that the stock is currently testing key intermediate-term resistance and investors with short-to-medium term horizon can book some profit at these levels and hold the rest with a stop at Rs 118.
Long-term investors can however hold with a deeper stop at Rs 78. If this level holds over the next three months, the stock can go on to a new high over the next two years.
But the stock faces key intermediate-term resistance at Rs 70 and a decline from here can drag it down to Rs 55 or even Rs 45 over the next three months.
Short-term investors can therefore take some money off the table at current levels and wait for a close above Rs 72 before re-entering the stock. Next halt on a breakout above Rs 72 would be Rs 87.
The long-term chart of Chambal Fertilizers is not a pleasing sight as the stock has been whipsawing between Rs 40 and Rs 95 since October 2007 recording extremely sharp rallies and equally steep declines.
Investors with low risk-appetite should therefore steer clear of this stock since it would be difficult to jump off once the decline commences.
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