Query Corner: DLF drawing near key medium-term hurdle

I have purchased Indian Hotels Company at Rs 110. Should I book loss or switch?

H.K. Nandecha

Indian Hotels Company (Rs 61.9): Indian Hotels Company is trading well below your purchase price. But the stock is attempting to hold above Rs 50 since the end of 2011. The stock is moving in a sideways band between Rs 50 and Rs 75 since then. You can hold the stock with the stop-loss at Rs 50. The outlook will worsen only if this level is breached.

That said, the stock will face resistance at Rs 80 in the medium-term. Investors with a short to medium-term investment horizon can divest their holding if the stock is unable to get past this level. Targets on move above Rs 80 are Rs 93 and Rs 114.

The long-term outlook will turn positive only if the stock manages a close above Rs 114. We envisage a move between Rs 50 and Rs 100 in this stock over the next twelve months.

Please let me know the prospects of Indian Overseas Bank bought at Rs 154.

T.D. Bhatia

Indian Overseas Bank (Rs 75.7): This stock is in a long-term decline since the peak of Rs 175 recorded in December 2010. Though this decline has breached the stock’s long-term support at Rs 90, investors can take heart from the fact that it is attempting to stabilise around Rs 70. Those still holding the stock can continue to do so with stop-loss at Rs 65.

It would be best for investors to exit the stock once it breaches the Rs 65 level since the next support is a long way away, at the 2009 trough.

The stock will face resistance at Rs 95 and Rs 110 over the medium-term. Failure to move beyond Rs 110 will mean that the outlook remains cloudy for the stock. Targets on close above Rs 110 are Rs 122 and Rs 136.

Can I purchase Zylog Systems at current price?

Rajeev

Zylog Systems (Rs 48.1): Zylog Systems underwent a horrendous period in the last quarter of 2012 as the stock price crashed 80 per cent due to issues with brokers selling shares pledged by the promoters. The stock has, however, continued its decline in 2013 too and is at a multi-year low currently.

The reversal from the recent low at Rs 37 is also not too convincing. Next support on the chart is the 2009 trough at Rs 30 and the stock appears headed towards this level.

It would be better to avoid this counter until there are clear sign of a reversal. That would be obtained only if the stock manages a close above Rs 74.

Long-term outlook will reverse only on close above Rs 140.

Please advise me about the prospects of Lloyd Electric and Engineering bought at Rs 59 and Mangalam Cement bought at Rs 202.

V.S.K. Prasad

Lloyd Electric and Engineering (Rs 50.2): This stock is in a decline since November 2012. This decline could pull the stock lower to Rs 38 or Rs 36. Investors can hold the stock only as long as it trades above Rs 36. Target below is at Rs 27.

The stock faces key medium-term hurdle around Rs 74 and inability to clear this level will keep it vacillating in the range between Rs 35 and Rs 70.

Long-term outlook will reverse higher only on close above Rs 100.

Mangalam Cement (Rs 151.2): Mangalam Cement is reversing lower after a strong rally in 2012. Medium-term supports for the stock are at Rs 150 and Rs 120.

You can exit if the stock declines below Rs 150, since your cost price is much higher. A dip below Rs 120 can drag it lower to its 2012 low at Rs 80.

If the stock manages to hold the Rs 150 level, it can move on to Rs 190 or Rs 218 in the months ahead.

Please discuss the outlook for ING Vysya Bank at current market price.

P. Mahesh Kumar, S. Ashok Chakravarthy

ING Vysya Bank (Rs 589.5): This stock is in a stellar uptrend, up 94 per cent since last June. If we consider the long-term trend in the stock, the third part of the move from 2009 appears to be in motion now. This move has the immediate target of Rs 620. Since the stock is nearing this target, investors should brace themselves for some volatility. Those sitting on profits can hold with trailing stop loss of 5 per cent from recent peak to ride out this uptrend.

Key medium-term support for the stock is at Rs 490. This can serve as the stop-loss level for long-term investors. Short-term supports for the stock are at Rs 544 and Rs 512.

What is the outlook for DLF?

Jaiprakash

DLF (Rs 268.1): DLF is roaming in the wilderness over the last two years, moving in a narrow range between Rs 170 and Rs 250.

There is, however, a feeble rally forming in the stock since June 2012. The higher bottoms formed in the stock since the low at Rs 169 is promising.

The level around Rs 170 has also supported the stock repeatedly since August 2011, reinforcing itself as the long-term base for the stock.

That said the stock is approaching key medium-term hurdle at Rs 300. Reversal from this zone can drag DLF towards Rs 238 or Rs 212.

Targets on close above Rs 300 are Rs 336 and Rs 373. The long-term outlook can be salvaged only if the stock manages to move above Rs 550.

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