Query Corner: Downtrend in Century Textiles

I bought Rolta one month ago at Rs 180. Can I repurchase the stock at these levels or wait for some more time?

A. Mayilsami

Rolta India (Rs 139.9): The market recovery in 2009 helped Rolta India regain only half the losses made in the preceding crash and the stock reversed lower from the resistance zone between Rs 200 and Rs 220. A medium-term correction is currently unfolding from the January 2010 peak of Rs 210. Medium-term supports are at Rs 126 and Rs 106.

Investors can purchase the stock at these levels with stop at Rs 105. However, decline below Rs 105 will imply that the stock could decline sharply to Rs 75. Next long-term support is at the March 2009 low at Rs 41.

Medium-term resistances are at Rs 160 and Rs 180. Long-term target on a close above Rs 210 is Rs 260.

I purchased Housing Development and Infrastructure Ltd (HDIL) at Rs 430 and NHPC at Rs 37.5. Should I hold these shares or book loss?

A.N.S. Sankara Rao

HDIL (Rs 151.4): HDIL continues in the throes of a bear market. It could not even retrace 38.2 per cent of the 2008 crash in the recovery made in 2009. The stock needs to close above Rs 465 to signal that its long-term outlook is turning positive. Struggle to get beyond the resistance zone between Rs 400 and Rs 450 can result in a movement between Rs 60 and Rs 400 over the next couple of years.

The recovery since the first week of February is not very promising and the stock could slide lower to Rs 122 and then to the long-term support at Rs 70 in the months ahead. This negative view will be mitigated only on a close above Rs 233.

Investors can hold the stock as long as it trades above Rs 120. The alternative strategy would be to switch out of this stock at current levels and consider re-entry on a close above Rs 230.

NHPC (Rs 23.1): In our review of NHPC in December last year, we had indicated that key support for the stock was at Rs 27.6. We had also written that investors could accumulate the stock in the band between Rs 26 and Rs 28.5 with stop at Rs 26. The stock breached this stop-loss in the last week of January and went on to record the low of Rs 22.2 by February 10.

Short-term resistances are at Rs 25 and Rs 27. Inability to move beyond the first resistance will mean that the stock will remain volatile in the days ahead and can even test the recent low at Rs 22.2.

Investors can hold only as long as it trades above Rs 22.

Please let me know the near-term perspective of Amara Raja Batteries and Rural Electrification Corporation Ltd (RECL). Can I exit from these shares now to re-invest later?

Y.M. Das

Amara Raja Batteries (Rs 160): This stock is in a medium-term decline from its October 2010 peak of Rs 228. Amara Raja Batteries, however, has strong support around Rs 150 and the stock is not too far away from this level. Investors can therefore hold the stock with stop at Rs 145. Sideways movement in the range of Rs 150 and Rs 230 will be positive from a medium-term perspective and can be followed by a break-out to Rs 270 over the next 12 months.

Subsequent supports are at Rs 127 and Rs 105. The long-term trend in the stock is positive and close below Rs 100 is required to negate this view.

Rural Electrification Corporation (Rs 230.2): RECL is also in a steep decline since its October peak of Rs 410. This decline has already retraced half the gains made from the December 2008 low of Rs 53. However, the stock is showing no sign of slowing down and is moving lower with a series of lower peaks and troughs. The medium-term trend deciding level for this stock is Rs 190.

Investors can hold the stock as long as it trades above this level. Resistances for the medium-term would be at Rs 300 and Rs 340. Investors with a smaller investment horizon can divest their holding at either of these resistances.

Please guide me on the outlook for Everonn Education in medium-term?

Pankaj

Everonn Education (Rs 566.1): Key medium-term support for Everonn Education is at Rs 490. The stock declined below this level on February 10, but bounced back in the next session itself. Investors can hold the stock as long as it trades above Rs 480 on a closing basis. The stock however faces strong resistance at Rs 634. Inability to move above this level indicates a propensity to decline to Rs 490 or Rs 440 in the days ahead.

Conversely, a close above Rs 634 will take the stock to Rs 750 or Rs 800. Long-term view on this stock will turn positive only on a close above Rs 800.

I bought shares of MMTC at Rs 1,257. What is the outlook for this stock for the next two to six months?

K.S. Hanif

MMTC (Rs 933.9): MMTC has long-term resistance at Rs 2,000 that occurs at 61.8 per cent retracement of the decline from the November 2007 peak. The stock struggled to move above this resistance between June 2009 and July 2010 before reversing lower. A medium-term correction is currently in motion and this correction has dragged the stock below the key support at Rs 1,032. Investors can, however, continue to hold the stock with stop at Rs 900.

Rebound from this level can take the stock higher to Rs 1,300 or Rs 1,550 in the ensuing months. However, a decline below Rs 900 can make the stock decline to Rs 645.

Please discuss the prospects of Century Textiles.

Dr R. Johari

Century Textiles and Industries (Rs 308): Century Textiles has not yet shaken off the bear's grip and the structural downtrend that began from the January 2008 peak continues to be in force in this stock. The stock could not move above the long-term resistance at Rs 550 in 2009. As long as the stock trades below this level, it can remain volatile in a broad trading range between Rs 130 and Rs 550.

The recent bout of correction has dragged the stock down to the key medium-term support at Rs 300. Investors can hold the stock as long as it trades above this level. Subsequent, targets are Rs 200 and Rs 150.

Medium-term resistances for the stock would be available at Rs 400 and Rs 475.

Kindly discuss the medium- and long-term prospects of Prakash Industries.

Vikram Johari

Prakash Industries (Rs 71.7): Prakash Industries is an extremely volatile stock that covers considerable ground in a very short time-span. The stock is currently declining from the peak of Rs 244 recorded in April last year. Since it has already closed well below the key support at Rs 114, it is likely to decline to Rs 60 or even to the November 2008 low of Rs 34 in the days ahead.

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